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2004 – 2012 The Canadian housing market

The Canadian housing market2004-2007

During this period, the rules governing mortgage insurance were relaxed, making it easier to get a mortgage.

Consumers were allowed to take more money out of their homes when they refinanced, up to 95 per cent of its value (compared with previous 85%). Zero-down-payment insured mortgages were allowed. Amortization lengths on insured mortgages were extended to 40 years from 25 years.

2008

After the U.S. subprime crisis takes its toll, Finance Minister Jim Flaherty starts tightening the rules. On July 9, he announces that effective Oct. 15, the minimum down payment on insured mortgages rises to 5 per cent and the maximum length of insured mortgages will be cut to 35 years.

The collapse of Lehman Brothers in September threatens to hammer bank lending and the economy. To keep it going, Mr. Flaherty announces the Insured Mortgage Purchase Program on Oct. 10. The program sees the government, via CMHC, buy nearly $70-billion worth of mortgage pools from the banks through 2009 and early 2010 so they can lend more.

2010

Mr. Flaherty gets back to tightening the rules, saying that while “there’s no clear evidence of a housing bubble,” he wants to be prudent and prevent one. On Feb. 16, he announces changes effective April 19:

The maximum amount consumers can take out when refinancing their mortgages is reduced to 90 per cent of the value of the house.

Banks are told to ensure that variable-rate borrowers could afford a fixed rate.

Rules are tightened for obtaining mortgage insurance on speculative investment properties.

2011

On Jan. 17, Mr. Flaherty announces further tightening, as of March 18:

Maximum length of insured mortgages will be 30 years.

Consumers will only be able to borrow up to 85% of the value of their home when refinancing.

As well, effective April 18, the government will no longer back mortgage insurance for home equity lines of credit, which had been skyrocketing.

2012

The tightening continues. On June 21, he announces that as of July 9:

Ottawa will no longer back mortgage insurance on houses that cost more than $1-million.

Maximum length of insured mortgages drops to 25 years.

Consumers can only borrow up to 80% of the value of their home when refinancing.

Source: Canada’s $800,000,000 housing problem

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