The federal Conservative government is expected today to introduce new rules that are aimed at toughening up mortgage lending in a bid to curb record household debt levels.
The key change Finance Minister Jim Flaherty is likely to unveil is a cut in the maximum amortization period, to 30 years from 35 years.
Mortgages that have amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers who have less than a 20-per-cent down payment on their home.
Government sources also say that Flaherty is expected to lower the maximum amount Canadians can borrow against the value of their homes, to 85 per cent from 90 per cent, and remove federal-government backing of home-equity lines of credit.
The sources add that the minimum down payment, which is at five per cent, will remain as is.
Further, the government will not unveil any plan to target condo purchases by requiring monthly condo fees be added to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage.
The changes to the country's mortgage rules emerge amid rising concern about the record levels of household debt, which, measured as a ratio of money owed to disposable income, nears a startling 150 per cent.
That surpasses the level of debt held by U.S. households, whose appetite for borrowing helped stoke the financial crisis of a few years ago.
The Bank of Canada recently warned that the debt levels are growing faster than income, adding that the risk posed by consumer indebtedness to the domestic economy would continue to escalate without a "significant change" in how consumers borrow and how banks lend.
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