Langley Real Estate

New Mortgage Credit Changes - January 17, 2011

The federal government announced 3 NEW changes to credit qualification today: 1. Maximum amortizations are reduced from 35 years to 30 years on new government-backed mortgages with loan-to-value ratios greater than 80 per cent effective March 18, 2011. 2. 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 effective March 18, 2011. 3. Withdraw government insurance backing on home equity lines of credit effective April 18, 2011.  Analysis: Reducing the maximum amortization to 30 years is intended to "encourage savings through home ownership" according to the federal government. However, it also restricts the the ability to buy a home for many Canadians. The purchasing power of home buyers requiring mortgage insurance will be dimished by approximately 5 per cent with a 32 per cent GDS, making housing less affordable and by extension negatively impacting a consumer demand and home prices.   The change in the maximum amount Canadians can refinance their homes as well as the withdrawing of government backed home equity lines of credit will negatively impact home renovations in BC, estimated value of $7.3 billion in 2010.  This is the third effort to unwind the government's relaxation of mortgage qualifications in 2006 and an admonition that the 2006 policy change was an unmitigated failure.  CM.