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Flaherty Expected to Tighten Canadian Mortgage Rules

Posted by James Osmar | Posted in Random, Real Estate Articles | Posted on 17-01-2011

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Real Estate Blog - Post provided by the CBC NEWS

Federal Finance Minister Jim Flaherty is expected to announce tighter mortgage rules on Monday                                                                        real-estate-motgages
to combat concerns over high Canadian household debt.

The announcement is set for 8 a.m. ET in Ottawa.

Among the expected changes are the lowering of the maximum number of years the government will back mortgages — from 35 to 30.

Ottawa is also expected to:

- Limit the insurance coverage by Canada Mortgage and Housing Corp. on lines of credit.

- Reduce the upper limit that Canadians can borrow against their home equity to 85 per cent from 90 per cent.

The changes come following recent warnings from the Bank of Canada on household debt levels.

In December, bank governor Mark Carney cautioned Canadian households and businesses not to be lulled by current low interest rates, because repercussions from a hike could be swift.

Last week, Agathe Cote, a deputy governor at the bank, told a Kingston, Ont., audience that a sudden weakening in the Canadian housing sector could affect other areas of the economy given the high debt loads of some households.

If that shock hits, Canadians would be expected to cut back on their spending, she said.

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