Canada’s housing agency announced it will tighten mortgage qualification rules for high-risk borrowers, a controversial move that could curb credit in an economy trying to emerge from its deepest contraction of the postwar era.
The state-owned Canada Mortgage & Housing Corp., which offers default insurance to home buyers with low down payments, said it will narrow eligibility criteria as of July 1. Buyers will need higher credit scores and lower debt burdens to qualify, the agency said Thursday in Ottawa. Evan Siddall, CMHC’s chief executive officer, said the move would protect new home buyers from falling prices and reduce taxpayer risk to any market correction.
The changes though could slow housing market activity just as the federal government, and the nation’s banking regulator and central bank, have been flooding the economy with hundreds of billions in cash to stoke credit and fuel a recovery.