Canada Tightens Mortgage-Financing Rules |
| Wall Street Journal - Jun 21, 2012 |
Canadian Finance Minister Jim Flaherty dramatically tightened the country's mortgage-financing rules—the fourth time in four years—as officials here struggle with what they have increasingly worried is an overwrought housing market.
Canada survived the global economic and financial crisis relatively unscathed. With interest rates low here, households have loaded up on debt, in particular mortgage debt. Meanwhile, housing prices, especially in big cities like Toronto and Vancouver, have soared.
That has government officials and the country's central bank warning about possible overheating in some property sectors. They have recently targeted Toronto's condominium market, in particular, as possibly overbuilt and vulnerable to price distortions.
The new measures announced Thursday will take effect July 9 and significantly ratchet up lending requirements by banks and other lenders. They cut the maximum mortgage-amortization period to 25 years from 30; reduce the amount of home equity Canadians are eligible to borrow against, to 80% from 85%; and limit taxpayer-backed mortgage insurance to homes worth less than one million Canadian dollars (US$981,000).
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- Posted: 2012-06-21 11:06:54
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