In a bid to remove speculation from the red-hot Canadian housing market, Finance Minister Jim Flaherty announced a series of new rules for first-time home buyers. Suggesting that during the current period of record-low rates, the temptation to take on more debt than would otherwise be prudent must be reigned-in to ensure buyers have sufficient capacity to adapt to higher interest rates.
The new regulations include:
- borrowers will now be required to meet the criteria for a five-year, fixed-rate mortgage rather than the less stringent three-year test
- down payment requirements for borrowers purchasing homes in which they will not be living (i.e. “speculators”) has been increased to 20 percent
- the total amount borrowed for any one property is now limited to 90 percent as opposed to the current 95 percent limit
Source: The Canadian Press