The Canadian federal government announced plans to tighten rules on mortgage lending in a bid to curb rising household debt levels.
In its fourth crackdown in four years on a still-hot housing market, Canada tightened conditions for both borrowers and lenders on Thursday to put the brakes on home buying and deflate a possible housing bubble before it pops.
The new rule will come into effect on July 9. It states that the maximum amortization period for a government-insured mortgage will drop to 25 years from 30 years. Canadians will be able to borrow against their home equity to a maximum of 80 per cent, down from the current 85 per cent.
"I have been listening to the market, and quite frankly I don't like what I hear ... Some calming of the market is desirable," Finance Minister Jim Flaherty told a news conference in Ottawa, according to Reuters.
"In Toronto, in particular, what I've observed and heard about from developers is continuous building without restriction because of persistent demand. This concerns me because it's distorting the market."
In lowering maximum amortization periods to 25 years from 30 and reducing the most homeowners can borrow against the value of their homes to 80 percent from 85 percent, Flaherty singled out Toronto - where the number of completed condo units next year will be double the five-year average - for its "continuous building, without restriction."
