The proposed increase in the minimum down payments for government-backed mortgages from 5 per cent to 10 per cent would not slow down the out-of-control price growth in Canada’s most overheated housing markets and will only make things more difficult for first-time buyers, according to a prominent industry player.
As reported by Garry Marr for the Financial Post
, Canada Guaranty president and CEO Andrew Charles warned that a hike in the down payment requirements would not be appropriate in the current climate where many of consumers are first-time buyers who are already struggling with the ever-rising costs of living, especially in Vancouver and Toronto.
“The first-time home buyer market in Canada represents approximately 30 per cent of the entire housing market,” Charles stated. “The insured segment of the market has a $1-million cap in terms of maximum. We take the view that increasing, or further penalizing, the first-time home buyer does zero or has minimal impact on price valuations in two specific markets.”
Charles added that markets outside of Vancouver and Toronto will get hit hard by the regulatory change, since majority of the policies in the two cities are conventional mortgages—that is, those that require 20 per cent or more, and thus would not be affected by such a hike.
“An increase in down payments will negatively impact the Calgary, the Edmonton, the smaller urban centres where we’ve seen prices values moderate and in some cases decrease,” the executive warned.
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