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• Last updated Wed July 9, 2008 cbc news. Canada 's housing market is strong & secure, the government says, but will be subject to tighter mortgage insurance rules. (Ted S. Warren/Associated Press) The Federal government says Wednesday that it is tightening the rules relating to government- guaranteed mortgages, even though there is no evidence that the Canadian market is facing the kind of turmoil that has disrupted the United States. The new rules, set to take effect Oct 15, are a "responsible and measured approach..to reduce the risk of a U.S.- style housing bubble developing in Canada, " the Department of Finance said in the news release. However, it also said the Canadian creditors "prudent and cautious approach" to mortgage lending, as well as sound supervision, have "allowed Canada to maintain strong & secure housing and mortgage markets." The government said the measures will apply to new, government- backed, insured mortgages. "Canadians who already hold mortgages will not be affected," it said. The changes include: -Cutting the maximum amortization period to 35 yrs from 40. -Requiring a minimum down payment of 5%, whereas loans for 100% of the price are possible now. -Establishing a requirement for a consistent minimum credit score. -introcducing a new loan- document standards. The government ackknowledged that the proportion of bank mortgages in arrears is stable at 0.27%, "near the lowest levels experienced since 1990 and well below the highs of 0.65% experienced in each 1992 and 1997. And housing prices don't show evidence of speculation, the Finance Department said, because they are "in line with economic factors such as the low interest rates, rising incomes and growing population." Mortgage insurance proptects lenders when a borrower defaults by making up any shortfall needed to repay the loan if the sale of the property doesn't cover the debt. Federally regulated lenders must have mortgage insurance on loans where the buyer's down payment is less than 20% of the price. The Canada Mortgage and Housing Corp. (CMHC), a crown corporation, as well as private insurers provide mortgage insurance. The government backs CMHC and also private mortgage insurers so the private insurers can compete with CMHC. Just over a year ago, the Parliament passed a bill changing mortgage insurance to make home buying easier, and in 2006, CMHC eased the insurance rules.

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