Canadian Finance Minister Jim Flaherty is watching Canada's hot real estate market and may increase the minimum down payment for homebuyers and cut back amortization periods if the housing market continues to heat up, according to CTV News.
"If we see further evidence that there is excessive demand in the housing market or that there's an indication that people are taking on obligations that they will not be able to handle in the future when interest rates rise, then we will take some action," Flaherty said in an interview with CTV's Question Period.
He added, "The likely action we will take is to increase the size of the down payment from five per cent to a higher number, reduce amortization - bring it down from 35 years to something less." These actions will make it more difficult for homebuyers to qualify for a mortgage.
Flaherty's comments come after the release of the November housing numbers last week by the Canadian Real Estate Association, which showed existing home sales increasing by 73 per cent compared to a year ago and prices rising by 20 per cent. Here in Edmonton, our numbers have not reflected this same amount of growth.
The Department of Finance reduced the maximum amortization period for mortgages from 40 years to 35 years in October 2008 in an effort to prevent a U.S.-style housing bubble.