Finance Minister Jim Flaherty tightened mortgage rules this week and, in doing so, may have taken some steam out of a housing market that has seen prices and sales activity rise rapidly over the last year.
For most consumers, the changes are unlikely to make it more difficult to get a mortgage, but it could reduce the size of that mortgage.
Mr. Flaherty's changes apply to any mortgage backed by Canada Mortgage and Housing Corp. (CMHC).
Those who qualified for a mortgage under the old rules should still be able to get one, but may not be able to borrow as much and, as a result, might have to look at buying slightly less expensive properties.
The change most likely to affect most borrowers will be a new credit test for any CMHC-backed mortgage.
Previously, a lender wanted to ensure a borrower could make the monthly payments on a three-year fixed-rate mortgage. Now, they will want to see that a borrower can afford a five-year fixed-rate mortgage - even if the borrower plans to take out a mortgage with different terms that could result in a lower monthly payment.
Those refinancing a mortgage can borrow up to 90% of the asessed value of their home, down from 95%. The intent is to prevent a homeowner from carrying a mortgage worth more than the home itself.
Investors will now have to put up 20% of the purchase price instead of 5% to get a government-backed mortgage to buy any property that is not his own residence.
Rules go into effect April 19, but lenders are likely to begin enforcing most of these measures immediately.
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