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Housing bubble? Flaherty to tighten mortgage rules

 Courtesy of Vancouver Sun   Feb 16, 2010

OTTAWA — The federal government is set to announce new restrictions for Canadian mortgages on Tuesday, sources say.

The rules are meant to prevent a housing crisis from happening in Canada as interest rates rise, leaving homeowners with mortgages they can no longer afford to pay.

Financial experts speculated last week that the measures may include reducing the minimum down payment and amortization rate for Canadian homebuyers.

The announcement comes after increased concern by economists that Canada’s low interest rates may have encouraged homeowners to take out mortgages they can’t afford or increased their debt by remortgaging their homes.

Flaherty’s measures will help prevent Canada from suffering a housing crisis similar to the United States, where mass foreclosures caused prices to drop as the market collapsed, sources said Monday.