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Feds announce tighter mortgage rules to rein in record household debt

Speculation ended this morning as Canadian finance minister Jim Flaherty announced the details on new changes to the country’s mortgage rules, some which will take effect as early as March 18. In a move expected to remove 20,000 of the most marginal prospective buyers from the housing market this year, the maximum amortization period for CMHC insured mortgages is being reduced to thirty years. It’s currently thirty-five years, having been reduced from forty years last April.


The new rules also impact upon homeowners who seem all too eager to cash out their equity to “buy boats and cars and big-screen TV’s,” Mr. Flaherty said as he announced that home equity loans will be capped at eighty-five percent of the home’s value, also on March 18. CMHC will discontinue its practice of insuring home equity loans and lines of credit a month later on April 18. Home equity lines of credit have grown by 170% in the last ten years, doubling the rate of growth seen in the mortgage market.


The moves were widely applauded by a number of bank leaders who have recently expressed concern about the rapid expansion of household debt and called upon the government to tighten lending rules. Frank Techar, president of commercial and personal banking for the Bank of Montreal called the actions “prudent, measured, responsible and timely.”


The Bank of Canada has been reluctant to raise interest rates from record low territory as the Canadian economy continues to perform sluggishly. Analysts at Scotia Capital suggest that tightening of lending rules is the more effective way of curbing debt without risking a further slowing of overall economic growth.


Predicting that the rule changes will moderate housing demand across the country, Flaherty announced that the minimum down payment required for a CMHC insured mortgage will remain at 5%. “We do not want to create any shock in the market or any sort of dramatic pressure. We want to be moderate,” Flaherty told reporters at the early morning briefing.


New mortgage rules could price some out of the market – Financial Post

Debt worries trump home sales – Globe and Mail

Buying a home about to get tougher – Financial Post

Flaherty details new mortgage rules– Globe and Mail


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Norm Fisher
Royal LePage Vidorra

Norm Fisher, Author of the TeamFisher Saskatoon Real Estate Blog

About Norm

Licensed in 1993, Norm brings a wealth of experience to TeamFisher. He has worked in every imaginable capacity including sales agent, office manager, team leader, broker and now, broker/owner. Norm has written a weekly review of the Saskatoon real estate market for more than 650 consecutive weeks which may make him the most consistent industry blogger in the world.Less...

Licensed in 1993, Norm brings a wealth of experience to TeamFisher. He has worked in every imaginable capacity including sales agent, office manager, team leader, broker and now, broker/owner. Norm has written a weekly review of the Saskatoon real estate market for more than 650 consecutive weeks which may make him the most consistent industry blogger in the world.

Norm is known for his passion for technology and can most often be found exploring and experimenting with the next big thing in real estate marketing. He was the first Saskatoon real estate agent to promote a home online and has been an early adopter of new technologies ever since. “Everything about this business has changed over the past 20 years, and it will happen again in the next ten. An open mind and a curious attitude are all that’s needed to continue to find new ways to serve our clients by delivering a faster, smoother, worry-free transaction,” says Norm.

In his spare time, Norm enjoys Crossfit and cycling, some years accumulating over 2,000 kilometres on the road. He’s a strong supporter of the Royal LePage Shelter Foundation and enjoys raising funds by joining fun, fitness-related initiatives like the Grouse Grind for Shelter. In 2015, he trekked the Peruvian Andes to Machu Picchu. In 2017 he walked the southern highlands of Iceland across mountains, sand, snow, ice, lava fields and forest for seven days. Collectively those initiatives raised over a million dollars for Canadian women's shelters.
 

Note: We are in the process of bringing this blog home to the TeamFisher.com domain and we have a lot of stuff to move! Another 700 posts can be found at normfisher.com where they'll remain until we can get them moved here.

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