New down payment guidelines may be in the works

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The Department of Finance is reportedly recommending tougher down payment requirements, and initial broker reaction may be softer than expected.

“These changes won’t make a huge difference; we need to stabilize the economy, especially the housing market, and this would help,” Jerry Brar, principal broker with Jerry Brar Mortgages, told “These changes would eradicate buyers who shouldn’t qualify.”

Brar also argues the changes will help keep home prices in check, which he says the market needs.

Originally reported by Canadian Mortgage Trends -- citing a “high-level lender source connected to the DoF, who declined to be identified” – the Department reportedly may recommend a graduated down payment scale that could be structured like this:
  • Homes costing $0 to $500,000 would require at least 5% down
  • Homes costing $501,000 to $700,000 would requires at least 7% down
  • Homes over $700,000 would require 10% down
When reached for comment, the Department of Finance said it does not comment or speculate on possible policy actions, or discuss anything that might be under consideration.

“The Government continuously monitors the housing market and regularly reviews the merit of actions to support the long-term stability of Canada's housing market and financial system,” the Department wrote in an email to “Mortgage insurance rules have been adjusted in the past to protect Canadian families who hold wealth in their homes, and Canadian taxpayers, who support home ownership through government-backed mortgage insurance.”

If it does come to pass, the new guidelines may be more welcome among brokers than previous rule changes.

“I don’t think it’s an overreaching policy and I don’t think it would hinder business,” Kevin Gillis, a mortgage consultant with Cameron Financial Consultants, told “Buyers looking for houses over $500,000 usually have higher incomes and can handle the higher down payments; forcing them to do so will help protect them financially.”
  • James Robinson on 2015-12-03 9:21:05 AM

    I don't have a fundamental problem with this concept, however, hopefully all of the brilliant minds in Ottawa will realize that the purchase price thresholds must be scaled based on average prices in each community or at least group them the way lenders group areas for sliding scale purposes. $500k buys a closet in Toronto and Vancouver and a mansion in Windsor or Saint John.

  • Joe Potenza on 2015-12-03 9:29:45 AM

    I agree with James comments.

  • Robert Clancy on 2015-12-03 9:44:01 AM

    The down payment sliding scale on home prices is not a bad idea if rules are going to be implemented. The statement that anyone with only 5% down should not be borrowing does not make sense as borrowers have being doing this for years. The housing market in Toronto and Vancouver are strong but this is not the case all over Canada. Money is very cheap right now with a lack of supply so this is a big factor to higher prices in these areas. Messing around with lending polices is not always the answer. Creating jobs and improving economic growth will increase rates which in turn will correct the real estate market.

  • Warren Ross on 2015-12-03 9:44:42 AM

    I agree with James. I'll go further by saying that if the objective is to maintain a stable affordable housing market, we should have different lending and insurance guidelines in each region to better manage risk. One size fits all doesn't work considering the major regional economic differences. This would also be useful in offsetting the ineffectiveness of monetary policy in this country. It's hard to manage inflation when one part of the countrys fortune is tied to resource prices, and the other half is tied to the value of the dollar for exports.

  • Mortgage Delivery Guy on 2015-12-03 10:11:44 AM

    Not a bad idea, for sure.
    Mortgage Delivery Guy

  • Dave on 2015-12-03 10:39:32 AM

    Interesting to see how this will play out. Bottom line is people have no equity in their homes when putting 5% down , as after CMHC fees it is actually 1.4% down, let's call it no downpayment in reality. Zero room for error , if the house market corrects, the mortgage is underwater.

    If the government really wants to make some changes to the heated Vancouver and Toronto markets, they need to do something about wealthy foreigners using our real estate for money laundering and "investments". These buyers are skewing the prices , way beyond what they should be. They overbid for every house because they dont care if they overpay. Their goal is to get their money out of their country and use ours to clean it. Tax them through the nose if they don't want to live here . They provide no benefit to most Canadians by using Canada as a money washing tool.

  • YYCBroker on 2015-12-03 12:53:27 PM

    I agree with above comments, and think the foreign investor issue is one which the government should deal with to help curb the rapidly rising home prices in the major centers. To have large blocks of condo's sitting empty because they are owned by foreign nationals who have only purchased them to enable them to get their funds out of their home countries is almost criminal. If they are not going to occupy the property as their own principal residence, with associated proof of permanent residency, they should be taxed heavily as non-residents or denied investment/purchase approval.

  • Ron Price/DLC on 2015-12-04 10:35:55 AM

    I agree YYC but taxing is not a solution with those having unlimited funds. All the government needs to do is make it illegal for foreigners to purchase. Period. End of story. Unless they can prove permanent residency in Canada.

  • MP on 2015-12-04 2:10:26 PM

    I like this idea. I think we could go even further and do homes up to $250,000 3% down. This would encourage people to move out of the big cities and move to smaller communities.

  • MP on 2015-12-04 2:13:38 PM

    I agree with Dave's comments about Foreign investors. If they are here to become Canadian then that is a different story. I think that they shouldn't be able to buy rental properties.

  • RossK on 2015-12-07 1:59:59 PM

    One Question:

    Is there an MB reader here who has placed a mortgage of 95% LTV on a $999,999 home?

    Are there 1000 of you out there who have in the last 2 years?

    I thought not. This is another bad policy decision that will not impact the market in any way unless it served to lower home buyer confidence in the market.

    There are effective ways to proactively address the market and help all Canadians own homes with less risk. A graduated down payment system does not.

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