Anybody remember 1999? Back then the CMHC would only insure mortgages for a maximum of 25 years. Then the Canadian government decided the housing market would be a great way to goose the economy since it was working so fantastically in the US. In 2005 the max amortization went to 30 years, in 2006 to 35 and in 2007 we saw the introduction of 40 year terms with zero down to compete with private companies like AIG and Genworth.
Now there are worries about the debt load of the Canadian consumer and the government is trying to slowly take away the juice without causing a mess. Last year we saw the 40 year term vanish and go to 35. Now we have the most recent round of changes.
..new federal rules will reduce the maximum amortization period to 30 years from 35 years for government-backed insured mortgages with loan-to-value ratios of more than 80 per cent.
Secondly, Ottawa will lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes.
Thirdly, Ottawa will withdraw government insurance backing on lines of credit secured by homes.
You can find some interesting analysis of what these changes mean in our forums. What effect do you think this will have on the Vancouver market. Would our home prices be where they are today if there never where government insured 40 year zero down mortgages? Can this end well?