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The Government of Canada announced adjustments to the rules for government guaranteed mortgages aimed at protecting and strengthening the Canadian housing market. The new measures include:

Fixing the maximum amortization period for new government-backed mortgages to 35 years;
Requiring a minimum down payment of five per cent for new government-backed mortgages;
Establishing a consistent minimum credit score requirement; and
Introducing new loan documentation standards.
The announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada.

The new limits are planned to take effect October 15, 2008. This would allow existing mortgage pre-approvals with the common 90-day duration to be used or expire. Certain exceptions would also be permitted after October 15. The Government will work closely with all stakeholders to ensure timely and effective implementation of these measures.

As these measures relate only to new, government-backed insured mortgages, Canadians who already hold mortgages will not be affected by this announcement.

The measures announced will build on the strength of Canada’s housing market. According to the International Monetary Fund, the increase in house prices in Canada is based on sound economic factors such as low interest rates, rising incomes and a growing population. A recent Statistics Canada report concluded that home ownership is at record levels, with over two-thirds of Canadians owning their own home.

Mortgage arrears-overdue mortgage payments-have also remained low. In recent years, the percentage of mortgages in arrears for three months or more continues to be at low levels not seen since 1990.

Tips from VancouverTDMortgage.com
a. Minimum Credit Score – 620
b. Maximum Total Debt service Ratio – 40%
c. Maximum Gross Debt service Ratio – 32%
What does it mean to you? Do you want to better your credit score?
Talk to John Hahn about your current credit score and financial situation to plan out the home buying with pleasant outcome.
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Mortgage clients constantly tell me “I need the best mortgage rate. What rate do you offer?”

While the client is always right, and we always provide the best rate and terms, we do convey the need to look at the “extras” when selecting the best mortgage. Extras include:

The Bank of Canada kept the status quo on it’s Prime Rate today.  Prime rate will therefore stay where it is, at 4.75%.

The Bank seemed less concerned about inflation in this statement,saying, “Core inflation has stayed at 1.5 per cent as expected.”  The BoC expects that “total and core inflation will converge on 2 per cent in the second half of 2009.”  Falling commodity prices could help in that respect.

As for our economy, the Bank basically described Canada’s output as “slightly lower than expected,” but not enough so to cut interest rates.

The 5-year bond seemed somewhat unfazed by the BoC’s comments.  It’s still hovering near 3%.  The Canadian dollar, however, sank to it’s lowest level versus the U.S. dollar in over a year, before rebounding strongly.

The BoC’s statement today offered few clues as to when they would alter rates next.  We’ll see what happens between now and the BoC’s next interest rate meeting on October 21.

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