In the last eight years, the federal government implemented six rounds of changes to tighten the rules for new government-backed insured mortgages (Typically referred to as a CMHC insured mortgage)and contain the risks in the housing market. Here is a summary from CREA (Canadian Real Estate Association):

1. Effective October 2008:

• Maximum amortization period of 35 years
• Minimum down payment of five per cent
• Consistent minimum credit score requirement
• New loan documentation standards

2. Effective April 2010:

• Debt servicing standards calculated based on the higher of the mortgage contract rate or Bank of Canada conventional five-year fixed posted mortgage rate, for mortgages with variable interest rates or fixed interest rates with terms less than five years
• Maximum refinancing limited to 90 per cent of the property value
• Minimum down payment of 20 per cent on non-owner-occupied investment properties

3. Effective March 2011:

• Maximum amortization period of 30 years
• Maximum refinancing limited to 85 per cent of the property value
• Withdrawal of government guarantees on low-loan-to-value non-amortizing secured lines of credit (effective April 2011)

4. Effective July 2012:

• Maximum amortization period of 25 years
• Maximum refinancing limited to 80 per cent of the property value
• Maximum gross debt service ratio at 39 per cent and the maximum total debt service ratio at 44 per cent
• Maximum purchase price of less than $1 million

5. Effective February 2016:

• Minimum down payment of 10 per cent for the portion of a house price above $500,000

6. Effective October 2016:

• Requiring all insured mortgages to qualify under maximum debt-servicing standards based on the higher of the mortgage contract rate or Bank of Canada conventional five-year fixed posted mortgage rate
• Standardizing eligibility criteria for high and low-ratio insured mortgages (effective November 2016)

7. Balancing risk (February 2017):

• A consultation process on lender risk sharing for government-backed insured mortgages

8. CMHC premium increases

• announced February 2014 – effective May 1, 2014
• announced April 2015 – effective June 1, 2015
• announced January 2017 – effective March 17, 2017

CREA argued, these measures were implemented over a short period of time and their full impacts have yet to be determined. CREA recommended the government take a pause to fully evaluate the cumulative impact of the recent changes before looking at implementing additional measures. The big one was item number 6. This was the area that took away approximately 25% of a Buyer’s purchasing power.