New Lending Rules & Bank Rate Remaining Same: Best News for Cdn Economy

Immediate Info re: new lending rules:
As long as you have signed a legally binding commitment to purchase on or before March 17th (remember the new rules take effect on March 18th), then they can choose to Amortize their mortgage over 35 years.

Refinancing - if someone is refinancing, they must have a signed mortgage commitment on or ...before March 17th.

Announced Monday January 17/2011:

Finance Minister Jim Flaherty is changing the maximum length of most mortgages to 30 years from 35 years; cutting the maximum that can be borrowed against a person's home and eliminating government-backed default insurance of home equity lines of credit.

The key tool the federal government uses to control the mortgage market is the Canada Mortgage and Housing Corp. (CMHC). Banks typically will not provide a mortgage to anyone with a down payment of less than 20% of the purchase price unless the CMHC is willing to backstop the loan.

THe CMHC will now no longer insure any mortage with a term longer than 30 years. Until the change, it was insuring 35-year mortgages.

Flaherty also instructed the CMHC it can no longer insure home equity lines of credits (HELOCs). That means individual banks will be on the hook for any HELOC defaults.

Because banks will assume all of the risks of default, banks are expected to tighten up eligibility requirements for HELOCs.

Finally, a person who wants to take out a loan against their home will be able to borrow a maximum of 85% of the value of their home, down from 90%.

GOOD News - Bank Rate Remains Unchanged.

The Cdn economic recovery is continuing on as expected. Concerns about overextension of household consumer debt, but the combination of low interest rates and w/ newly introduced lending restrictions will create a favourable environment for continued modest growth.

The Bank of Cda predicts 2011 growth at a rate of 2.4% ...& 2.8% in 2012- w/ an expectation to return to full economic capacity by the end of 2012.

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