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 MortgageBrokerNews.ca. “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 MortgageBrokerNews.ca. “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 MortgageBrokerNews.ca. “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.”