As we reported last week, the speculation about possible Mortgage Rules changing has become a reality…. the Federal government is going ahead with changes in Mortgage lending policies…..and these will come into effect April 19, 2010. Here are the 3 changes as reported on CBC.ca:
- all borrowers will now have to qualify using a 5 year fixed rate even if they choose a shorter term or a variable rate mortgage. (3 years fixed was the standard qualifying rates)
- refinancing your mortgage is now capped at 90% of the value of the home instead of 95%.
- investment properties will now require a 20% down payment instead of the current 5% down.
This last change will probably have the greatest impact in my opinion… It’s designed to discourage buying condos and houses for speculation purposes. However, ask anyone how their RRSPs are doing lately… the answer will probably not be good… A great many Canadians starting turning to real estate as means of buying a safe, long term investment… this could be done with as little as 5% down… but no more.
Early reaction is that these rule changes will create a small surge in house sales and then we should see a cooling off in the market…. only time will tell if these measures will have the desired effect or if they will simple force Canadians to get back into the Mutual Fund and Stock Market…. stay tuned as we follow this story..