Today the Canadian Government made changes to the mortgage rules affecting Canada in an effort to avoid the same meltdown that the US has seen.

So what changes do Canadian mortgage seekers now face? Well according to the
Vancouver Sun, the federal government will no longer be guaranteeing 40 year mortgage or zero down mortgages. There hope is that this will avoid the housing meltdown that the US saw from sub-prime mortgages.

Now government backed mortgages cannot be amortized over more than a 35 year period and they will require a minimum of 5% down payment. The borrower will also be required to have a specified credit score.

Most low down payment mortgages are going to be a thing of the past because unless you have 20% or more you’re stuck having to have mortgage insurance. Whether it’s provided by CMHC or a private insurer doesn’t matter.

It’s anticipated that it’s going to dampen an already slowing Canadian housing market. The problem is house prices are creeping out of the reach of many and coming up with a down payment is becoming increasingly difficult. 37% of all mortgages currently written are for longer than 25 years, and 90% of first time buyers are choosing a 40 year mortgage. They feel it’s worth the extra years to know they can swing the payment even during tough times. Zero down has also been popular.

What’s this mean for the Canadian housing market? Well it may stop a sub prime crisis like the US is facing, but analysts think that the slow down in housing sales could really effect the health of the economy.

And with fewer buyers those looking to sell their houses are going to have to reconsider their asking prices if they really want to sell their houses.

It looks like the real estate market in Canada is about to take a tumbler too!