Ottawa set to announce changes to mortgage rules

Tue Feb 16, 2010 12:38am EST
 
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(Reuters) - Canada will announce changes to mortgage rules to ensure Canadians do not take on too much debt, a government source said.

Finance Minister Jim Flaherty will announce that he is imposing new rules that will dictate how banks approve mortgages, and that certain borrowers will have to come up with larger down payments, the Globe and Mail paper said, citing an unidentified source.

Flaherty is scheduled to make an announcement at a news conference on Tuesday, the Department of Finance said on its website.

The government has been concerned that some borrowers who are taking out variable-rate mortgages will struggle with their monthly payments when interest rates rise, according to the paper.

The new mortgage rules will incorporate safety systems into mortgage evaluations, to help the banks evaluate whether to approve a mortgage or not, the paper said.

The primary aim is to ensure that the bank is comfortable that the borrower will be able to afford the monthly payments when interest rates rise, the paper said.

(Reporting by Sakthi Prasad in Bangalore; With additional reporting by Louise Egan in Ottawa; Editing by Kim Coghill)