Feds May Change Mortgage Rules to Cool Down Real Estate Market

John Pasalis in Toronto Real Estate News

CTV News reports that finance minister Jim Flaherty is considering raising the minimum down payment required for a mortgage in Canada and possibly reducing the maximum amortization period allowed in an effort to cool down Canada's hot real estate market.

Flaherty warns "If we see further evidence that there is excessive demand in the housing market or that there's an indication that people are taking on obligations that they will not be able to handle in the future when interest rates rise, then we will take some action,"

"The likely action we will take is to increase the size of the down payment from 5 per cent to a higher number, reduce the amortization -- bring it down from 35 years to something less," he said.

Low interest rates have been one of the key drivers behind the quick turnaround in Canada's real estate market.  The federal government is looking for ways to cool the demand in the real estate market without raising interest rates.  Increasing interest rates would have a negative effect on the other sectors of Canada's recovering economy.

John Pasalis is the Broker owner of Realosophy Realty Inc in Toronto. Realosophy Realty focuses on researching Toronto neighbourhoods to help their clients make smarter real estate decisions.

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Comments

[Jordan]

It would be an interesting way to bring housing prices back into check. Those of us first-timers who have 20-25% saved up as a downpayment for what used to be an "average" home are tired of being priced out of the market by those only willing to put down 5%.

[brent berry]

I applaud the feds on this move, although I wish they had done it a couple of years ago.

[Gordon C.]

I have no confidence in Joe Flaherty's ability to manage the economy.

When he instigated 0 down, 40 year morgages it was like throwing gasoline onto a fire for the BC real estate market. Eventually, someone explained a declining balance to him, and two years later he changed it to 5% down and 35 years. Too little - Too late

Mr. Flaherty has over the last few years indentured an entire generation to essentially making rent payments to the financial institutions based on these outrageously unsustainable home prices and the never to own plan of 35 year amortizations.

Mr. Flaherty and Company have played and lost the most valuable asset that most Canadians had - their home.

[sean]

I am worrying about house prices for months, I have asked every single of my friends, why the house price goes up without no fundamentals, all of them said: the cost of borrow is so low,$315 for $100k....> why not, we experience what our neighbor in south experience? learn from their house crises is a Big mistake in current world economy.
we must have Canadian version of house bubble.
so look at, I had house in Pickering which I bought in 2000 for $220k,in 2008 I sold it for $275K, from April/09 to current time the same house is selling for $320k. 8year house increase verses 6 months
I have viewed to houses in past 2 months their painting has not dry yet, the baseboard is not installed yet, they put on sell and it goes $25k above asking price ( I am talking about Pickering not downtown Toronto)
I am scared of current house market.

[Pappu]

I hope they do it ASAP but the reality is they won't do it. I think it should be 15 % down with 25 year amortization. 10% with 30 years won't cut it.

[Toronto Real Estate Agent]

Thanks for this value able post. I have read all the things very carefully its really a helpful and effective post.
Toronto Real Estate Agent

[new condos]

In the real estate market anything can happen from the time you sign the contract to the closing of the sale. Remain as flexible as you can be, you could come across concerns during the home inspection that the seller is unwilling to fix or the repair costs are more than the amount that was stipulated in the contract.