Flaherty has announced new mortgage rules to take effect by April 19th to "help negative trends from developing". From the Deparement of Finance website:
- Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
- Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
- Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.
Absent was a decrease in amortization and increase in down payment. I have previous posts discussing why shorter amortizations and larger downpayments are important. The previous two posts were regarding 0 down/40 year mortgages but the same principles applies to 5/35 mortgages as well. CMHC fees are reduced for each additional 5% down (up to 20%) and total interest costs are reduced as amortization is shortened.