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Michael Babad

Globe and Mail Update

Stories Report on Business is following today :

Flaherty tightens mortgage standards

Finance Minister Jim Flaherty unveiled updated mortgage rules today, a move expected to dampen house prices. Mr. Flaherty stressed that the real estate market is healthy, but that the new standards will help stop “negative trends” from developing. The new rules take effect April 19. The finance minister moved in three areas:

• Borrowers will need to meet qualifying standards for a five-year fixed rate mortgage even if they opt for a lower rate and shorter term. This, the government said, will help home owners prepare for inevitably higher interest rates.

• The maximum Canadians can withdraw in refinancing mortgages will now be 90 per cent of the value of their property, down from 95 per cent.

• A minimum down payment of 20 per cent will be required for government-backed insurance on properties, not occupied by owners, that are purchased for speculative purposes.

Scotia Capital economist Derek Holt, noting that the market alone would have cooled things down, said the biggest move that could affect prices is the one on qualifying, which would kick out many potential buyers. “The mortgage rule changes raise the odds of lower house prices into the back half of 2010 and into 2011,” Mr. Holt said. “… I think house prices were going to fall because of market mechanisms, but today’s rule changes add further pressure in that regard.”


Ottawa tightens mortgage rules

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Study warns of high debt

Ottawa’s new rules came just as a new study warned that more Canadians are taking on mortgages they may not be able to handle when interest rates rise again. The study by the Vanier Institute of the Family particularly noted young, first-time home buyers. National house prices reached $340,000 in the fall, the study said, an amount equal to five times the after-tax income of Canadian households. Average debt per household now stands at $96,100, which means a debt-to-income ratio of 145 per cent, or the highest since the Vanier annual study began 11 years ago. With interest rates set to rise, perhaps as early as this summer, many families “may not fully realize what an increase in mortgage rates by several per cent will mean for their monthly payments.” Read the story

Posted via web from Toronto Real Estate News | Blog


About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

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