NEW MORTGAGE RULES - METRO VANCOUVER

The federal govenernment has announced tighter mortgage rules which can effect the purchasing power of homebuyers in Metro Vancouver.  The new mortgage lending rules:

- The maximum amortization period from 35 years is now cut back to 30 years. 

How Does This Affect The Homebuyer?

For example : The change in amortization, which affects purchases with a downpayment that is lower than 20%, means a homebuyer with a 4% rate on a $300,000 mortgage would pay about $100 more per month.

Basically, the sense is there are more first-time homebuyers in the Lower Mainland who have used the 35 year mortgage.  These people with have to either come up with a slightly higher down payment, or they can't bid the same price on a house.

Why is the Federal Governement Doing This?

As you all know, there is a rising concern about the increased household debt in Canada.  The Bank of Canada warned that debt levels are growing faster than income, along with the risk posed by consumer indebtness to the domestic economy would continue to elevate without a "significant change" in how consumers borrow and banks lend.  Therefore, changing the mortgage rules allows the Bank of Canada to tackle household debt while avoiding jumps in interest rates.