Canada's Finance Minister Jim Flaherty on Thursday announced tighter mortgage lending rules amid warnings of rising household debt and an overheated housing market. The measures will make it harder for Canadians with limited savings to buy homes or obtain loans.
Flaherty said the government would reduce the maximum amortisation period for a government-insured mortgage from 30 to 25 years, a move that would increase monthly payments for homeowners but reduce the total amount of interest paid on a mortgage. The minister also said the changes would lower the maximum Canadians could borrow against their homes, from 85 percent to 80 percent of its value, and that the government would not back mortgages of homes costing more than C$1 million.
The measures, which take effect July 9, mark the fourth time the Conservative government has tightened mortgage rules since 2008. The minister said the reductions to the maximum amortisation period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage.