Government of Canada Takes Action to Strengthen Housing Financing

It’s more than likely in my mind that the mainstream media will make the following sound like a sign of bad things to come, but if you’ve spent time following the progress of real estate markets and related financing in the last few years you will understand that this is another example of how our government is working proactively to prevent our country from have a real estate bubble the way the U.S. and the U.K. and others did not so long ago and how Japan did in the early 90’s.

My apologies for the contrasting background. It seems to be the only way to paste this here.

Ryan Coffey

The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada’s housing market and continue to encourage home ownership for Canadians.

“Canada’s housing market is healthy, stable and supported by our country’s solid economic fundamentals,” said Minister Flaherty. “However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing.”

The Government will therefore adjust the rules for government-backed insured mortgages as follows:

· Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.

· Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.

· Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

“There’s no clear evidence of a housing bubble, but we’re taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it,” said Minister Flaherty. “If some lenders aren’t willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families.”

These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.

___________________________________
For further information, media may contact:

Annette Robertson
Press Secretary
Office of the Minister of Finance
613-996-7861

Jack Aubry
Media Relations
Department of Finance
613-996-8080

No comments

You must be logged in to post a comment.