Calgary, Jan. 18, 2011 – The Calgary real estate market appears to be on its way to recovery.
In the coming months, Calgary‘s housing inventory levels are expected to stabilize, resulting inan eventual return to a more balanced and sustainable housing market, according to CREB‘s 2011 forecast report released today. Click here to read more!
Concern over rising consumer debt levels prompted Ottawa to make three new changes to Canada's mortgage rules.
Finance Minister Jim Flaherty announced Monday [http://www.fin.gc.ca/n11/11-003-eng.asp] that new federal rules will reduce the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.
Secondly, Ottawa will lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes.
Thirdly, Ottawa will withdraw government insurance backing on lines of credit secured by homes.
By reducing maximum amortization from 35 to 30 years, will reduce interst paid by the borrower as the mortgage will be paid off faster, but it also reduces the borrower's purchasing power, too -- lower amortization = higher monthly payments, therefore tougher to qualify for a more expensive property.
The Finance Minister says that by lowering the maximum refinancing from 90 to 85 per cent means that borrowers will be able to borrow less for renovations and consolidate less of their high interest debt (no wonder the banks applaud these changes), and it will limit the borrower's cash flow, thus limiting reinvestment.
In addition to cutting mortgage terms, Ottawa is taking action to reduce the rapid rise in home equity lines of credit, or HELOCs. The government will do this by clamping down on the insurance that Canada Mortgage and Housing Corp. offers to the lines of credit.
These changes will not take effect imediately because of a requirement to give the industry 60 days notice before making policy changes of this nature, so please contact me if you or any of your contacts is looking to purchase or refinanace a home.