OTTAWA – Ottawa is changing mortgage rules again to make it more difficult for Canadians with limited savings to buy homes, or obtain loans.
Finance Minister Jim Flaherty is expected to announce Thursday morning that the amortization period on a mortgage will be dropped from the current 30 years to 25 years, where it was before the Conservatives came to power in 2006. —
As well, the government will limit refinancing loans to 80 per cent of the value of a home, from the current 85 per cent.
The new measures are part of a series of initiatives undertaken recently by the federal government to slow down the accumulation of debt of Canadian households, which reached a record 152 per cent of income in the fourth quarter of last year.
This will mark the fourth time Flaherty has tightened mortgage rules in response to the build up of credit that followed the Bank of Canada’s cuts to interest rates in response to the recession.
Central bank governor Mark Carney has been warning for several years that some Canadians are getting in over their heads with debt, and that they could face problems once interest rates start rising or if there is a second economic crisis.
Recently, the Bank of Canada estimated that the number of households in arrears could almost triple to 1.3 per cent if the unemployment rate were to rise by three per cent, about the same as occurred in the 2008-09 slump.