When the Minister of Finance announced a change to the eligibility rules for new government-backed insured mortgages on properties priced above $500,000 in December, it immediately garnered support from the industry.
“As a key stakeholder in the housing finance system,” said Stuart Levings, president and CEO of Genworth Canada, “we acknowledge the vital role government plays in this market and remain committed to helping first-time homebuyers achieve homeownership responsibly.”
The new rules – set to go into effect on February 15 – require the minimum down payment for new insured mortgages be increased from 5% to 10% for the portion of the house priced above $500,000.
For many, the regulations won’t mean much, due to the disparity in housing values from region to region.
The Alberta market, which has been hit hard by falling oil prices, has home values down 3.5% to an average of $385,317. Compared to neighbouring British Columbia, housing costs have skyrocketed to an average of $668,317 in November, up 16.3% from the same month in 2014.
For Quebecers, they sit quite comfortably with average prices of $283,560.
For Levings, it was a strong indication that the federal Liberals were showing “that maintaining a healthy and stable housing market is important for the new government.”
For borrowers who purchased properties above $500,000 in 2015, Levings estimated that 9% of our total transactional new insurance written could have been impacted, of which three quarters comprised homes below $700,000.
“Considering this, we expect that most borrowers impacted by the new rules would be able to afford the increase in down payment,” he said, “while some might choose to purchase a lower priced home.”
The minimum down payment will increase only gradually with the price of a house, varying from 5% for homes priced at or below $500,000 to 7.5% just below $1 million. A borrower buying a $600,000 home would therefore see their minimum down payment requirement increase by $5,000.