June 21, 2012

AREAhub Special Alert Changes to Mortgage Standards

AREA wants to ensure our members are fully informed about changes in

the industry that could affect your practice.

Today (June 21, 2012), the federal government announced amendments to

government-backed mortgage standards

in Canada that will take effect on July 9, 2012.

Jim Flaherty, Minister of Finance, announced the following changes to the

standards governing government-backed

insured mortgages:

the maximum amortization period was reduced from 30 years to 25 years;

the maximum amount Canadians can withdraw in refinancing their mortgages was lowered to 80 per cent from 85 per cent of the value of their homes;

the maximum gross debt service ratio was fixed at 39 per cent and the maximum total debt service ratio at 44 per cent; and

the availability of government-backed insured mortgages was limited to homes with a purchase price of less than $1 million.

Today’s announcement confirms Canadians will continue to be able to

purchase a home with five percent down.

Details of the announcement can be found here.

In response to the announcement, AREA member and CREA President

Wayne Moen issued the following statement:

"We believe today’s announcement is a measured response to the

government’s often stated concern about household

debt levels and the housing market. That being said, we would remind the

government that the re-sale housing makes

a significant contribution to the economy, adding an estimated $20 billion in

spin-off spending and over 165,000 jobs in 2012.

Recent statistics from The Canadian Real Estate Association indicate that

the national housing market remains balanced.

The impact of measures like those announced today must be closely

monitored to ensure they have the anticipated

impact and don’t create a spillover effect and slow the economy.

For these reasons, going forward, we would urge the government to

consider the impact of further interventions in the

market carefully.

REALTORS® and the government share a common interest in the value of

homeownership and its contribution to the

economy and the well-being of Canadians and our communities.

Property buyers and sellers should contact a REALTOR® if they are

considering entering the housing or commercial

real estate markets to better understand the impact of these changes in

their communities."