Foreign mortgage insurance companies have only been allowed to operate in Canada since May 2006, and with these new regulations came a more liberal view of borrowing practices. Prior to this date it was impossible to get a mortgage without making a minimum 25% deposit, but now it became possible to get mortgages without deposits, and also to repay these mortgages over a 40 year term.
This had the effect of heating up the property market, so in the summer of 2008 the government took steps to cool it by reducing the maximum mortgage term to 35 years alongside a requirement of a 5% deposit. These actions had the effect of protecting Canada from the worst of the US sub-prime mortgage market as the government also purchased the billions of dollars’ worth of insured mortgages in order to give the banks breathing room.
The housing boom in Canada was able to continue due to low interest rates, prompting the government to introduce minimum deposits of 10% for homeowners while investors must make a deposit of 20% or more. New laws introduced last week will take effect in March and will lower the mortgage terms to 30 years which some feel may dampen down the housing market.
While this may be true there are certain areas that may always buck the trend, especially in ever popular Vancouver. The average price of a home here it over $1 million, and a dilapidated property recently went on the market for just over $1 million, but created such interest that the eventual selling price was over one and a half million dollars. Part of the reason for high prices here is the popularity of the city with investors from the Far East who have money to spare from their own booming economy.
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