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Tighter mortgage insurance to protect home buyers

Last Updated Jul 2, 2020 at 5:09 am PST

FILE - A condo building is seen under construction surrounded by houses in Vancouver, B.C., on Friday March 30, 2018. THE CANADIAN PRESS/Darryl Dyck

As of this Canada Day, your credit score will have to be better if you want to qualify for default insurance

Maximum gross debt service ratio -- the share of one's income dropped into housing costs -- can't exceed 35 per cent

VANCOUVER (NEWS 1130) — As property prices fall in many parts of Canada, the federal housing agency is tightening the mortgage insurance rules to prevent new home buyers from going under.

Starting Wednesday, the Canada Mortgage and Housing Corporation is making it harder for high-risk borrowers to qualify for mortgage insurance. For example, people’s credit scores will have to be higher to qualify for the default package.

And the share of one’s income that goes towards housing costs — including the mortgage, taxes, and heat — can’t exceed 35 per cent, which is down from 39 per cent.

Market analysts say these kinds of changes usually come when times are good, not when the market is teetering on the edge.

The housing corporation is also working to prevent the practice of borrowing money for down payments.

While this is meant to keep borrowers from defaulting, it could also make the economic recovery slower overall.