Federal Finance Minister Bill Morneau announced several changes on Monday to tackle mortgage stress for Canadian buyers.
The hope is to cool Canada’s hot real estate market somewhat and make it easier to purchase homes in the hot big city markets.
Today’s #housing measures bring consistency to mortgage rules, reduce risk for
taxpayers and ensure everyone is playing by the rules.
— Bill Morneau (@Bill_Morneau) October 3, 2016
Morneau is hoping to close loopholes, bring in a “mortgage rate stress test”, and facilitate audits in the hopes of ensuring the housing market remains stable for the long-term.
Some of the specific measures Morneau revealed to stabilize the real estate sector include:
- Canada Revenue conducting audits related to real estate transactions especially Toronto and Vancouver
- Work with the provinces and cities on the ‘National Housing Strategy’ utilizing $2.3 billion in funding
- Starting October 17th, 5 year (or more) fixed rate mortgages will now have to go through the “Mortgage Rate Stress Test” by lenders. Previously they were excluded from the process
- On November 30th, mortgages that have low loan to value ratio mortgage insurance will now have to meet loan eligibility criteria which previously only applied to highly leveraged insured mortgages.
- The capital gains tax exemption on the sale of a principal residence will only be available to Canadian residents.
Monday’s announcement comes as concerns from a Swiss bank warned of a ‘housing bubble’ in parts of the country, especially in Toronto and Vancouver’s housing markets.