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Tougher Canadian Mortgage Rules Is A Good Thing For Canadians


The most influential bond rater Moody’s Investors Service declared Monday the tightening of mortgage-lending standards in Canada are “credit positive” for the country’s big chartered banks and their bondholders.

A week ago Finance Minister Jim Flaherty announced he would do the following: cut the amortization period to 30 years from 35 years for new mortgages backed by Ottawa through insurance issued by Canada Mortgage and Housing Corp.; lower the maximum amount homeowners can borrow when refinancing their mortgages to 85% from 90% of the value of their homes; and withdraw government backing on non-amortizing home equity lines of credit, or HELOCs.

Regardless, Canadian banks continue to hold high levels of top-quality capital on their balance sheets, which Mr. Nerby attributed to the “low risk weighting” of residential mortgage assets. “We think this simply highlights the importance of looking at several different measures of risk, including stress-testing, to assess bank capital adequacy. It also underscores the importance of the measures being taken by the Department of Finance to preserve stability in the Canadian mortgage market.”

Monty Sands of Mortgage Match Maker, Canada’s largest mortgage brokerage states that “insulating ourselves from situations we have seen transpire in the United States over the last few years can only be a good thing” and he believes that “providing Canadians with the ability to have a stable banking structure unlike that of our American friends can only be good for the Canadian Real Estate market in the long term.”

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