Finance Minister Jim Flaherty announced new rules Tuesday aimed at preventing homebuyers from getting into financial difficulty when mortgage rates rise.
After consulting with major Canadian lenders, Flaherty outlined the latest weapons at Ottawa's disposal aimed at removing some of the speculative froth in the housing market.
Second, the proposed rules would lower the maximum Canadians can withdraw when refinancing their mortgages to 90% of the value of their home, from 95%.
And finally, Ottawa will now require a minimum 20% down payment to qualify for CMHC insurance for non-owner-occupied properties purchased as an investment.
The last rule is aimed at reining in would-be real estate speculators who own multiple properties beyond their primary residence.
"We want to discourage the tendency some people have to use a home as an ATM, or buy three or four condos on speculation," Flaherty said.
There had been speculation the Department of Finance might implement legislation raising the minimum down payment from five to 10% of a home's value, or reduce the maximum amortization period from 35 years to 30 years.
Those measures were not part of Flaherty's announcement on Tuesday, but all options are still on the table should circumstances change, Flaherty said.
The new rules are not likely to revolutionize the industry. Indeed, a number of large Canadian lenders already practise the first peg of Flaherty's plan; after Tuesday's announcement, Bank of Montreal noted that it requires its high-ratio borrowers to be able to qualify using the five-year rate.
Related Stories
