Canadian Government Announced New Mortgage Rules For 2011

Finance Minister Jim Flaherty Announced New Mortgage Rules For 2011Federal government tightens mortgage rules 2011 are seem to be like it been cracking down on Canadians’ ability to qualify for a mortgage, although on one side these changes will help hard-working Canadian families to save by investing in their homes and future but on the other hand Canadian government is shifting its insuring behavior entirely on lenders because risk of these loans will now be on the financial institutions that lend the money. Will these recent changes will slow down Canadian housing market 2011 while making it harder to buy a new home or consolidate debt into your mortgage?

On Monday, January 17th 2011, Finance Minister Jim Flaherty along with Natural Resources Minister Christian Paradis announced new mortgage rules while implementing 3 main changes with an intention to alleviate concerns over consumer debt, to help combat increasing household debt and to add further stability to the Canadian housing market.

According to Mr. Flaherty’s recorded announcement that you can also watch his live speech at a “live televised announcement”, here’s are some words specially elaborated for my blog readers, he said: “Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and help protect us from the worst of the global recession. Canada has a prudent mortgage market and responsible lending practices…, our governments ongoing monitoring and sound supervisory regime along with the traditionally cautiously prudent approach taken by Canadian financial institutions to mortgage lending has allowed Canada to maintain strong and secure housing and mortgage markets. This has also allowed Canada to avoid housing bubbles witnessed elsewhere.

The following additional measures were highlighted as the new Canadian mortgage rules specially amended for Canadian families to safeguard their future investment and household debt.

New Canadian Mortgage Rules Announced For 2011:

  1. The maximum amortization period for less than 20 percent down payments is reduced to 30 years from previously it was 35 years for government-backed insured mortgages. Adjustments on the new amortization limit will come into force on March 18, 2011.
  2. The maximum amount that can be borrowed when refinancing a mortgage is reduced to 85 percent from current 90 percent value of the home. This new refinancing limit will come into force on March 18, 2011.
  3. The federal government will withdraw its insurance backing for home equity lines of credit secured on homes (HELOCs). Government backing for home equity lines of credit, rules regarding the borrowing of funds that are secured by homes will end on April 18, 2011.

Canadian 2011 Mortgage Changes:

Change in Maximum Amortization Period! The purpose reduction in maximum amortization periods for mortgages is to allow mortgagors and borrowers to pay off their debt quickly as possible and thereby reducing the total interest payment they will pay on their loan, but on the other hand as their mortgages will be amortized over a shorter time period, it will result in increase of their monthly payments.

Change in Lower Maximum Refinancing To Loan to Value Ratio! The reduction of 5% on maximum amount that a Canadian can borrow to refinance their mortgages will definitely limit the debt amount a family can incur. On the other hand it is also expected to allow and encourage savings like families will only be able to borrow less, resulting as being a greater equity in their homes.

Change in Withdrawal of Government Insurance on Non Amortizing Lines of Credit Secured by Homes! The Canadian federal government will cease to insure home equity lines of credit where money is borrowed against a home for use other than to purchase or refinancing. According to the Finance Department in relation to rules regarding the borrowing of funds that are secured by homes have been shifted their responsibility on financial institutions to deal such loans and the government will not manage them because these home equity loans have risen in recent years resulting in more consumer debt and definitely more loan defaults. Where the federal government thinks its the best measure to further stabilize Canadian housing market. It is also expected these financial institutions and lenders will make it more efficient and productive while making their strict criteria for the grant of such loans.

Some Professional Voices About New Mortgage Rules

In the words of Mr. Avery Shenfeld, an Economist; likens the new rules to the government putting Canadians on “a debt diet” that would further protect against a U.S. style mortgage crisis. The finance minister’s announcement indicates an increasing concern in the federal government about the impact of consumer debt on the Canadian economy.

Frank Techar, president of personal and commercial banking at Bank of Montreal said, “The actions announced are prudent, measured, responsible and timely”.

Analysts from Scotia Capital suggested government regulation was the way to go in terms of curbing household appetite for credit as opposed to the Bank of Canada raising interest rates, which they said would be “imprudent” at this time.

Exceptions will be allowed after these new Canadian mortgage rules changes come into force, if necessary, to satisfy a home purchase or a sale and home financing agreement arranged before the above mentioned dates of March and April.

If you have remembered, back in 1999 when the CMHC would only insure mortgages for a maximum of 25 years federal government decided the Canadian housing market would be a great way to goose up the economy since it was working great in USA at that time. In 2005 the maximum amortization went to 30 years, in 2006 went to 35 years, in 2007 it went to 40 year terms with zero down with an intention to compete with private companies in the market. Today’s government worries about the debt load of the Canadian consumer that has shown up in most recent changes seems to be started in year 2008 when the maximum amortization went again back to where it was in year 2006 as 35 years. Does it mean government is trying to slowly taking away moisture without causing it prominent dry look?

You are welcome to share your own experience and opinion regarding mortgage new policy “The Canadian Government Announced New Mortgage Rules For 2011”. For the previous major mortgage rule changes and announcements you may check out here: Canadian Mortgage Rules October 2008 and Canadian Mortgage Rules April 2010.


  1. Interest rates are going up after new mortgage rules! Last week Canadian housing market have seen a considerable increase in mortgage interest rates that is expected to rise more next week! Three Canadian major banks; The Royal Bank, TD Bank and CIBC have increased their posted rate for a five-year closed mortgage by a quarter of a percentage point to 5.44 percent. Beside RBC has also raised, five-year closed mortgage on its special fixed rate offering that’s by the same percentage amount to 4.39 percent.

    According to federal finance minister, Jim Flaherty, he was not surprised to see the interest is going up but he expects it to raise even more in upcoming days because interest rates are still very low. According to Flaherty’s prediction, since lending rates have been hovering close to historic lows. Flaherty told to reporters in the foyer of the House of Commons. “The recent increase by a couple of the banks is exactly what we expected.”

  2. The Canadian Press, April 4, 2011! “TORONTO – Several Canadian big banks are raising most of their fixed-term mortgage rates mean second quarter of 2011 will bring great business to these banks to enjoy the busy spring real estate market; TD Canada going up by 0.35 percentage points for the mortgage terms of five to 10 years starting from Tuesday 5th April 2011, The Royal Bank raised its rates on mortgages for five and 10-year terms by 0.35 percentage points and its seven-year rate by 0.15 percentage points, Scotiabank raised its posted rate for a 5 year closed mortgage by 0.4 percentage points to bring it to 5.69 per cent. The posted rate for five-year closed mortgages that is one of the most popular types of loans for Canadian home owners will rise to 5.69 per cent.”

    Lets see where this upward mortgage rate trend will take us in the third quarter, although looking at the increased buying trend of consumers and very fertile market of today for these financial institutions, these lenders can spare little part of their earning share to invest in the favor of the consumers while bringing down the increasing interest rate trend in future. Will they? ‘)

  3. According to the recent announcement from Bank of Canada it is keeping its key policy rate steady.

    In the Bank of Canada’s statement the it has been noted that it expects “growth in Canada will be slow through the mid 2012 before picking up as the global economic environment improves, uncertainty dissipates and confidence increases.” The Bank of Canada also projected that the Canadian economy “will expand by 2.1% in 2011, 1.9% in 2012, and 2.9% in 2013.”

    Most of the lenders will keep on doing business on 3.00% prime rate that means those with variable-rate mortgages will still enjoy relatively low rates. A new variable-rate mortgage can in many cases be obtained by qualified borrowers at Prime minus 0.20 per cent, or 2.80 per cent. Home equity lines of credit and variable-rate credit cards are also typically linked to the prime rate. The pricing for new fixed-rate mortgages is influenced by trends in the bond markets, rather than the central bank’s key policy rate. Moreover, the Bank’s next rate decision is scheduled for December 6.

  4. In Accordance with an annual report released by The Canadian Association of Accredited Mortgage Professionals in November 2011, the Canadian mortgage lending environment is favorable for people looking to get best mortgage deals in 2012 and future to come. You may check and access the latest market reports on the Mortgage Industry in Canada, here you can find out brief introduction and summary about
    “Annual State Of The Residential Mortgage Market In Canada 2011”.

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