The federal government is tightening rules for obtaining a government-backed mortgage. The move comes as Ottawa hopes to help Canadians prepare for higher interest rates in the near future.
Finance Minister Jim Flaherty said Tuesday that interested homebuyers will soon have to meet the requirements for a five-year, fixed rate mortgage -- instead of the three-year standard, which is in place right now.
The government is also limiting the amount of mortgage refinancing that homeowners can undertake. Canadians will only be able to refinance 90 per cent of their mortgage, down from 95 per cent.
"This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up," said Flaherty.
It was also announced that Canadians interested in purchasing investment properties will now have to put down a 20 per cent down payment in order to qualify for a government-backed mortgage.
Mortgage broker Gord McCallum says the new rules may force some first-time homebuyers to wait a bit before buying, but he says in the long run they'll be better protected.
"It makes sure that they will be able to afford the property when rates go up, not if," said McCallum. "It may end up forcing people to adjust their expectations when it comes to the price range that they are looking at," he added.
Neil Thompson has spent the past few months looking for a home and says the new rules offer a realistic approach to what Canadians can afford when it comes to buying a home.
Flaherty said the changes are expected to come into force on April 19th.
With files from Sonia Sunger and CTV.ca News Staff
