Broker: CMHC suggestion is ‘crazy’

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A proposal by the crown corporation to increase the minimum down payment would unfairly harm an important home buyer cohort, argues one professional.

“I think it’s crazy. If he wants to contain house prices from rising, I guess you could do that,” Vas Anton, a mortgage broker with Excel Mortgage, told MortgageBrokerNews.ca. “But how do you argue you can address affordability by increasing the minimum down payment?”

Late last week Evan Siddall, CMHC’s chief executive officer, suggested to an audience in London at the Bank of England panel on housing finance policy that minimum down payments should be increased in a bid to address housing affordability issues.

“Politicians are tempted to help first-time home buyers enter the market, but low down payments may be part of the problem adding to affordability pressures and macroeconomic vulnerabilities,” Siddall said in the speech, which was published on CMHC’s website.

But it’s first-time homebuyers that should be given a helping hand, according to Anton.

“I see day in and day out people are having issues scraping by with 5% and then they would have to do double that. So you’re putting home ownership even further away from your average Joe,” he said. “People buying a $6,$7,$800,000 property would probably be fine with a 10% downpayment, but if you’re buying between $250,000 and $300,000 I think they would (struggle).”

According to Anton, Canadians who already own homes could pony up the extra cash by tapping into equity they have already built.

The same can’t be said, however, for first-time homebuyers and new Canadians, however.

“But ask my son who is 21 and graduating from college next year if he’d be able to handle that. Unless I step in and say here sonny boy, here’s $13,000, go buy yourself a house,” Anton said. “What about new immigrants? How much money do you expect them to put aside.”

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  • Omer Quenneville on 2016-11-23 9:24:37 AM

    In the city of Toronto trade up buyers will need a minimum $60,000 for expenses just to trade up due to the double land transfer tax. This is the real cause of housing prices being so high. The trade up buyer is squeezed out creating a shortage of listings. How would you expect them to be able to "pony up". For something that is paid for with after tax dollars and is suppose to be a tax free investment, it certainly comes with one heck of an expensive tax bill.

  • LanceH on 2016-11-23 9:24:46 AM

    The whole purpose of CMHC was to assist Cdn's to get into home ownership. This proposal is the opposite of that mandate. Going back 25yrs ago, a CMHC study showed that the biggest barrier to home ownership, was the down payment, not the monthly payments. So they found ways to lower the entry. What this guy is really doing, is blaming the shortage of supply on CMHC and the buyers, rather than the myriad of other issues causing the problem. This is why you want Gov to simply "stay out of it". They "don't get it". This is so typical, laying blame in all the wrong places, so they end up stacking one harmful policy on top of another making things worse and worse!!

  • KJL on 2016-11-23 9:25:52 AM

    Cannot agree more. WTF most would say. If you a re buying 4 a second time, then sure 10. But for the first timers, 5 should always suffice . Stop messin with the people.

  • Richard Ventura on 2016-11-23 9:51:35 AM

    I agree with Vas here. The Government wants to control pricing with demand tactics instead of dealing with the inventory of homes. It is economics 101, supply and demand. Our mortgage rules are fine and they are not the problem, especially down payment. You will eliminate an entire market with this change. According to all experts that I have sat in on with CMHC, have said their default rate on mortgage are less than 1%. So My question then becomes, what aren't you telling us? Changing down payment is not the issue. First time home buyers will get money from parents and the cycle goes on and on. I firmly believe that Government is going to create this "bubble" burst with a change like this. I think it is time to research the areas that are hot and focus on making rule changes based on postal code to control mortgages. Smaller communities that do not have this problem are going to suffer.

  • Tim Berness on 2016-11-23 9:59:06 AM

    Never in history has their been a positive outcome from the govt trying to manipulate a commodity price. They have meddled with with housing market enough - they need to step back and let the market take care of it self.

  • nick on 2016-11-23 9:59:40 AM

    CMHC only cares about its exposure. Everything else is lip service. Do people really believe that cmhc wants to make it easier for first time home buyers. All the measures that they put in place , reduced amortizations, stress tests, and possible increase in minimum downpayments show otherwise.

  • nick on 2016-11-23 9:59:40 AM

    CMHC only cares about its exposure. Everything else is lip service. Do people really believe that cmhc wants to make it easier for first time home buyers. All the measures that they put in place , reduced amortizations, stress tests, and possible increase in minimum downpayments show otherwise.

  • Patrice Gooding on 2016-11-23 10:22:24 AM

    Maybe an option would be increasing the down payment for homes priced over $500,000.00 to 10%. Homes below can stay at 5%.
    First time home buyers would not be affected.

  • Amber on 2016-11-23 11:01:06 AM

    Increasing the down payment for homes above $500,000 isn't actually curing the problem. The reason for the house price increases has been said time and again as a supply issue. So by increasing the down payment for a certain value of home isn't going to cure the issue. House prices will continue to rise for first time home buyers until the starter home supply issue is cured. Cure that and you will find housing prices once again moderate!

  • Tony Colalillo on 2016-11-23 11:39:54 AM

    CMHC was created from the NHA, the National Housing Act, as a vehicle to insure mortgages that were in contravention of the Bank Act for loan to value ratios that were too high. How quickly we all forget that he NHA was created with the intention to help Canadians and especially first time homebuyers, toward home ownership. But when the financial crisis hit, something else happened: http://www.cbc.ca/news/business/banks-got-114b-from-governments-during-recession-1.1145997. If our current government keeps listening to so-called experts assessing the cause of the risk in CMHC's portfolio, look no further than the lending institutions themselves and why they received the $114 Billion bailout.

  • Dave Cunningham on 2016-11-23 1:08:37 PM


    Exactly.

    The head of CMHC is clueless and needs to be replaced.

    The only effect of his idea will be barring first timers from the market.

  • Ralph Cramdown on 2016-11-23 2:22:59 PM

    I think when the CMHC head talks about increasing downpayment requirements, first time buyers are precisely what he's targeting. The Bank of Canada keeps talking about household imbalances, and what they mean is too much debt. You can try to get Canadians to reduce their debt by taking out public service campaigns telling them to pay off their credit cards, but the obvious way to to reduce average debt to income is to target the borrowers who increase the average the most -- and that's first time buyers who max out their borrowing.

    But it's hard to tell whether this is just a trial balloon. He was appointed by the previous government, but he and the current Finance Minister seem to be on the same page, along with Poloz.

  • Paulette on 2016-11-23 5:54:42 PM

    Yes you stop the average joe from buying his first home or a home period but allows people with lots of money to buy up properties at low prices and rent themout to poor Joe and charge inflated rents ...because there are more renters than buyers ....then in a few years sell the cheap properties and make a lot of money because the equity they make is huge .....this is not a move to keep prices low its a way to keep the down people down ..... we are not stupid .......we see what is going on curse cmhc

  • LanceH on 2016-11-24 12:35:54 PM

    The gov efforts will not only not work, as they're not addressing the supply problem (totally agree with Tim), but they're creating a future problem, because I suspect these new measures will get withdrawn at some point, possibly a different gov in the future, and all those kicked to the curb today will then rush to market, re-creating the same problem all over again. Too often, Gov's simply wish to be "seen to be doing something".

  • Isee on 2016-11-24 4:36:05 PM

    Well if you guys would look lil' further than the tip of your nose (or bank account) you would understand that there is nothing more urgent for the fed but soft landing is possible. A gentle deflating of the bubble in our delusional markets so the borrowing orgy stops, sales and prices waft gently lower, affordability is enhanced and the middle class isn't gutted just like in US. Of course, no bubble in history has ever ended nicely.

  • John Doom on 2016-11-24 4:45:22 PM

    Well if all you guys, macro-economists would look lil' further than tip of your nose (or your bank account) you would understand that there is nothing more urgent for the fed but soft landing. Targeting millennials with no money to buy pair of jeans, never mind buying houses, is precisely what new policies are for. . . . to put downward pressure on prices by removing 15++% of buyers. A gentle deflating of the bubble in our delusional markets so the borrowing orgy stops, sales and prices waft gently lower, affordability is enhanced and the middle class isn't gutted just like in US. Of course, no bubble in history has ever ended nicely.

  • Gord on 2016-11-25 3:30:24 PM

    Very nice

  • Sonia on 2016-11-25 3:32:29 PM

    This is ridiculous how ignorant some of you industry leaders are.

  • Gerry on 2016-11-28 1:14:33 PM

    The big concern seems to be overall consumer debt, at least mortgage debt is secured and default levels are historically low. Perhaps more concern should be placed by the government on
    'time limited low interest credit cards' which can be obtained easily and car loans and leases with '0%' interest or payments being made by the manufacturer for 12 months to entice parties to purchase cars they can't really afford. I think it's time the government refocused on the actual 'unsecured' consumer debt being artificially being offered by so many.
    Nick's comment about reduced amortizations; stress tests; credit criteria to get a mortgage are valid, people are well qualified to get a mortgage. Not so much with the unsecured consumer debt (low interest credit cards; 0% interest car loans; car leases where you put up one payment and drive away with a new car).
    I suppose you would then get push back from the auto makers saying the economy needs car sales to provide jobs.

  • LanceH on 2016-11-28 4:32:29 PM

    Besides new Cdn's and 1st time buyers is the divorce group. We all get those clients too and they're being hit hard.

    With a default rate of about .5%, the old rules were working just fine. The whole point to CMHC's existence is to get Cdn's into homes. Making it harder, is contrary to that mission.

  • Sean Binkley on 2016-11-29 2:51:59 PM

    If the issues are in specific cities (Toronto Vancouver) then easy to pin point a solution based on postal codes. Painting the entire country with the same "bubble brush" is the lazy-man's way of saying they've solved the problem.

  • Kim Amorim on 2016-11-29 3:10:19 PM

    Supply & Demand rules the market.
    If the Governments cut red tape, executed serious physical planning, preparing build-able land to be placed on the market, for Canadians to buy and build on, without the interference of speculators and the monopoly of builders registered with the Home Owners Protection Act,( a government creation to skip responsibilities due to the LEAKY Condo disaster ) then Canadians would afford shelter again. Obviously the present situation will burst...$ with dire consequences.

  • Sandy Brown on 2016-12-02 10:28:46 AM

    Patrice Gooding - what market to you live in. Southern Ontario first time home buyers are facing $500,000 prices - perhaps $600,000 and over for 10%

  • BJ on 2016-12-02 9:16:27 PM

    Tim Berness - never before has housing been perceived a commodity. That's the problem. Housing isn't the same as pork bellies.

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