Canada to Tighten mortgage lending laws

With Canadians taking on more than 2.5 trillion dollars in mortgage debt, the Bank of Canada has warned that this – as well as the red-hot housing market – may lead to devastating economic shocks. 

In response to this, Canada has tightened mortgage lending laws.

The rise in mortgage debt was demonstrably due to the increased number of mortgages over the last year – the number of new mortgages rose 41.2% since the start of the pandemic. Unsurprisingly, the bulk of this figure comes from the country’s hottest housing markets in British Columbia and Ontario. But, this tremendous mortgage debt reflects the surging house prices throughout the pandemic – the average housing price across the nation increased by almost 42% since the start of the pandemic.  

Now, borrowers of uninsured and insured mortgages must show that they can afford loans that meet the higher of these two options: their current rate plus 200 basis points, or 5.25%. This will ensure that borrowers will manage their mortgages when the historically low-interest rates rise – which they are expected to, as we near the end of the pandemic.