This article appeared on the CanadianRealEstateMagazine.com on August 30th, 2011.
Refinancing activity of insured mortgages in Canada dropped 40% following the federal government’s tightening of mortgage rules in March, according to a second quarter financial recap report out this week by the Canada and Mortgage Housing Corporation.
Earlier this year the government limited insured mortgage refinances to a maximum of 85% loan-to-value ratio, after previously setting the mark at 90%. Finance Minister Jim Flaherty also reduced the maximum amortization period for new government-backed insured mortgages to 30 years from 35. While buying activity did not seem to slow much after these changes, refinancing seems to have been particularly hit.
Additionally, homeowner mortgage insurance dropped 10% initially after implementation of the news rules, but by June was down a lesser 5%.
The CMHC also noted in its report that insured mortgage volumes were down 13% compared to last year and 20% below what was anticipated for the year.
Along with the new mortgage rules, the CMHC attributed weaker housing activity and a drop in its mortgage insurance share to the drop in activity.
Flaherty in June told reporters he was “satisfied” with the moderation in the housing market following the tightened rules.