A trio of mortgage rule changes were introduced earlier this week with overall aims of helping consumers reduce debt.
Finance Minister Jim Flaherty said Monday the new federal rules will see the maximum amortization period dropped from 35 to 30 years, those refinancing can now only borrow against 85 per cent of the value of their homes and finally, federal insurance backing on lines of credit secured by property is being withdrawn.
Flaherty said these measures will protect the stability of the Canadian economy and comes after a recent warning from the Bank of Canada that domestic debt is now the highest ever recorded.
Mission mortgage broker Doug Lifford said the changes aren’t a bad idea as most Canadians are carrying too much debt.
Locally, most people won’t be much affected by the changes, he said.
The decrease in amortization is not too big a deal, the National Mortgage Service business owner explained. A $300,000 mortgage at 3.65 per cent at 30 years will now cost that homeowner an extra $106 a month. While not a lot of money, Lifford said this will force first-time homebuyers to look more closely at what they can afford, but it is still possible to buy a home with only five per cent down.
“These are prudent changes,” he noted.
The new rules only affect mortgages attained with a less than 20 per cent downpayment and come into effect March 18.