Finance Minister Jim Flaherty announced …..

On January 17, Finance Minister Jim Flaherty announced three new changes to the rules for government insured (default insured) mortgages. The intent of these changes is to support the long-term stability of the housing market and address rising household debt in Canada.

3 changes to default insured mortgages

  1. Lowering the maximum amount consumers can borrow when refinancing their mortgages
    This change will lower the maximum mortgage amount to 85% of the appraised value of the property from the current 90%. This change will help to promote savings in homeownership and ensure that homeowners don’t become overextended by using all the equity they have built up in their home when refinancing.
  2. Reducing the maximum amortization period for new government insured (default insured) mortgages
    The maximum amortization for all new default insured mortgages will be reduced to 30 years from the current 35 years. This change will help reduce total borrowing costs for consumers, helping them to build up equity more quickly.
  3. Withdrawing government insurance backing on lines of credit secured by homes: effective April 18.
    No impact to RBC as we do not currently participate in this product.

The effective date of the first two changes will be March 18. Applications submitted and approved by CMHC prior to March 18 will still qualify under current guidelines.

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