The federal government will no longer guarantee 40-year or zero-down mortgages in an effort to avoid a housing crisis like the sub-prime mortgage meltdown experienced in the United States.
In an announcement released yesterday, the government said government-backed mortgages would require a minimum down payment of five per cent and a maximum amortization period of 35 years. Furthermore, they will be tightening-up on the credit evaluations and will set new loan documentation standards through their mortgage insurance vehicle, CMHC.
These new measures point to 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 rules will take effect Oct. 15, 2008 to allow existing mortgage pre-approvals to be used or expire.
(Forwarded from Keith Baker, The mortgage group)