Fears of a housing bubble in some areas of the country have moved the Canadian government to tighten up lending rules in Canada. We applaud the changes, although we're not sure the fears of a bubble were completely warranted. That said, the changes make a lot of sense and probably always should have been in place. The changes are:

1. When applying for a mortgage you must qualify for a 5-year fixed rate mortgage -- as opposed to the three-year standard in place right now, even if you are going to take a different rate or term.
2. When re-financing you can only re-finance up to 90% of the value of your home (instead of 95%).
3. Investors must put down 20% for government backed mortgage insurance on investment properties.

The goal of these changes is to decrease speculative investing, and to help ensure that home buyers are able to afford their mortgages when it comes time to renew (since rates are expected to be higher). I think it makes a lot of sense to cool down the areas of the market that contributed the most to last year's financial crisis.

"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."

There is a lot of concern that the government will increase the minimum down payment for first time buyers to 10% (from 5%).

These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.