The finance ministry of Canada announced changes to the mortgage rules for canadians. Although the overriding desire is to cool down the housing market in Canada you might also argue that the economy is driven by consumerism, and when people are buying homes they often spend further money on additions to their home creating ancillary jobs.  Here is a copy of the press release in case you haven’t seen it. 

As part of the Government’s continuous efforts to strengthen Canada’s housing finance system, the Honourable Jim Flaherty, Minister of Finance, today announced further adjustments to the rules for government-backed insured mortgages.

“Our Government stands behind the efforts of hard-working Canadian families to save by investing in their homes and their future,” said Minister Flaherty. “The adjustments we are making today will help them realize their goals, build on the previous measures we have introduced to keep the housing market strong, and help to ensure households do not become overextended. As just one example, the reductions to the maximum amortization period since 2008 would save a typical Canadian family with a $350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage.”

The Government is announcing four measures for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent:

  • Reduce the maximum amortization period to 25 years from 30 years. This will reduce the total interest payments Canadian families make on their mortgages, helping them build up equity in their homes more quickly and pay off their mortgages sooner. The maximum amortization period was set at 35 years in 2008 and further reduced to 30 years in 2011.
  • Lower the maximum amount Canadians can borrow when refinancing to 80 per cent from 85 per cent of the value of their homes. This will promote saving through home ownership and encourage homeowners to prudently manage borrowings against their homes.
  • Fix the maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent. This will better protect Canadian households that may be vulnerable to economic shocks or an increase in interest rates.
  • Limit the availability of government-backed insured mortgages to homes with a purchase price of less than $1 million.

“Investing in a home is a great way to save,” said Minister Flaherty. “That is the dream that mortgage insurance was intended to support. The measures we are taking today maintain that intended purpose.”


How will this affect the Barrie real estate market? That has yet to be seen, however, Barrie is largely a blue collar city and the demographic is young at an average age of approx 36. Many people at age 36 do not have a lot of equity in their homes and consequently they buy homes requiring insurance. Since the ministers changes largely directed towards insured mortgages these changes may well have some impact on the Barrie market. Other areas that may well see a cooling off would be the condo market in Toronto that is notoriously frothy with high ratio borrowing. The Barrie real estate market has seen a strong year so far and this may well begin a slow down for the remainder of the year.

Please consult your mortgage broker for further detailed information and if you are thinking about buying a home you may wish to lock in a rate and conditions with your broker today.

Ian Hocking

Sales Representative,

Royal LePage First Contact Realty, Brokerage

Filed under: Barrie Buyers informationBarrie Community InformationBarrie Real EstateInvestment Real Estate

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