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Finance minister announces down payment rule changes by Justin da Rosa | 11 Dec 2015

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New down payment rules will go into effective February 15, 2016.
“The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets, while not overburdening other regions,” Finance Minister Bill Morneau said in a release. “They also rebalance government support for the housing sector to promote long-term stability and balanced economic growth.”

Finance minister announces down payment rule changes

New down payment rules will go into effective February 15, 2016.

“The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets, while not overburdening other regions,” Finance Minister Bill Morneau said in a release. “They also rebalance government support for the housing sector to promote long-term stability and balanced economic growth.”

The minimum down payment for new insured mortgages will increase from 5% to 10% for the portion of the house price above $500,000, the finance ministry wrote.

For example: A $750,000 home will now require $50,000 down -- 5% for the first $500,000 and 10% down for the remaining $250,000.

Properties up to $500,000 will continue to require a minumum of 5% down. Properties in excess of $1 million will still require 20% down.

The changes are meant to reduce taxpayer exposure while supporting long-term stability of the housing market, according to the ministry.

“This measure will increase homeowner equity, which plays a key role in maintaining a stable and secure housing market and economy over the long term,” Morneau said. “It also protects all homeowners, including many middle class Canadians whose greatest investment is in their homes.”
  • Jesse D on 2015-12-11 10:16:19 AM

    They seriously need to cease their focus on the mortgage side and put some focus on the credit card companies that are charging high rates and constantly increasing limits.

  • donna on 2015-12-11 10:23:36 AM

    More balanced then I thought it would be. I believe the aging population is the cause of this. How many will be downsizing in the next 10 years? How many of higher priced homes will be on market at that time? I am being more specific for where my region is. I am not in Toronto or Vancouver.

  • Sean Binkley on 2015-12-11 10:35:58 AM

    Not exactly a big impact given that it means an additional $25k under new rules vs old on a purchase of $999k. Should be interesting to see if lenders implement the rules earlier than the actual effective date. Will the client also get a discount on the insurance premium (ie blended rate) or will they just charge the same and have lower risk now?

  • Shayne on 2015-12-11 10:39:58 AM

    Are they grandfathering folkso who only have 5% down on a build and the contract is already in place?

  • David Larock on 2015-12-11 10:43:17 AM

    A very reasonable change that anyone who cares about the long-term health of CDN mortgage lending should applaud.

    Folks, before everybody starts whining about how the Feds should increase regulations on credit cards and unsecured lines instead, can we all please put on our big boy pants and recognize that residential mortgage debt represents a far greater risk to our economy than unsecured debt?

    This is a tired narrative that our industry needs to abandon and frankly, complaining about it makes us look uninformed and hurts our credibility.

  • Steve on 2015-12-11 10:50:33 AM

    Totally agree with Jesse D. The credit card companies are the one driving up household consumer debt because of their high interest rates and willingness to just give out credit. All this does is make it tough for people to sell and pay off their debt and then re-purchase. Not a free market system when the government intervenes so much.

  • Bruce on 2015-12-11 10:58:17 AM

    Thank You Jesse D…
    I have been saying the same thing for years (I wrote to Jim Flaherty years ago and professed the same concerns to no avail) the Banks continue to ride the gravy train on the backs of Canadians and Government does nothing about it. Lets tweak the mortgages that's the problem, REALLY!
    Credit Cards are a sacred cow to the Banks. (HANDS OFF!)
    When my clients are approved they all are within the lending guidelines even the new more conservative policies set out by Government and Banks. The problem is after the fact when you have Banks handing out credit cards like “Chicklets” and the same client 3 to 4 years from the original mortgage closing now has $30,000 in credit card and LOC unsecured debts with large payments.
    What we have are Banks always asking for Government intervention to control and manage mortgage debt but I have yet to hear the Banks asking the Government to step in and control credit card rates and limits?

  • John Van Driel on 2015-12-11 10:59:17 AM

    Agree with Jesse D. Many consumers pay MORE in interest on their cards, etc. than on their mortgage. Crunch the numbers!

  • scott on 2015-12-11 11:01:15 AM

    Jessie I could not agree with you more. The interest charged by credit card companies are criminal and the cause of most families demise. If you or I charged those rates we would be in jail.

  • Joel Sida on 2015-12-11 11:01:18 AM

    Porperties below 500k wil be in high demand

  • Mike S on 2015-12-11 11:42:32 AM

    Can't agree with you more Bruce and Jesse. Regulations keep getting tighter and tighter, but banks can still add a $12 000 pre approved credit card to a commitment for a client at 43% TDS.

  • Bert on 2015-12-11 11:42:56 AM

    I agree Jesse.

  • Garry Dicks on 2015-12-11 11:51:19 AM

    Credit cards and Lines of Credit are cash cows for the Big 5 and as the Big 5 are the largest lobby group in Ottawa, don't expect any changes.

  • david s on 2015-12-11 12:08:42 PM

    I agree with Jesse there needs to be more focus on the rampant high-rate unsecured debt which is the catalyst to a borrowers default on their mortgage when they can no longer manage those debts. I understand the impact on tax payers when a Mortgage goes into default and that mortgages are Canadians biggest debt but rarely is it the mortgage payment that is causing the default.

  • Don S on 2015-12-11 12:14:36 PM

    Personal I like the change. It allows first time buyers in most markets to purchase with 5% and in the higher markets a little more equity is required. If an when we see rising interest rates and we will, this will be important. People only pay their mortgage when their home has equity in it.
    We all know that when interest rates rise affordability will become an issue and prices will drop especially in the major market as it continues to be a bid market and the increases in value has been incredible. The only issue I have with government is that its like pealing off a band aid very slowly. It been painful with all the changes so please look at it closely so we don't have to deal with this every few months. As far as credit cards go they have always been an issue. Some lenders are now asking client to pay off and close their credit facilities like the old days and this is a good thing. People should take response ability for their own actions we can't keep blaming the government. You would think the hi interest rates would discourage using them can you imagine how much people would spend if they lowered the rates. In closing this is a great business it's our job to educate and this is what sets us apart.
    So good luck and Merry Christmas one and all

  • Ann Todd on 2015-12-11 12:30:15 PM

    I'm in Toronto and in the past year, this would have affected 3 of my clients. The interesting thing is that only 1 of the 3 actually purchased in Toronto. 1 bought in Alberta (had another home, so if required, could have sold and had larger downpayment) and one bought in Pickering. I think this is going to have minimal impact for most people and the market in general, but I guess time will tell.

  • Mark N on 2015-12-11 12:37:44 PM

    Blaming the credit card companies and other others for high interest loans? Don't you think that people need to look in the mirror and realize maybe they shouldn't pay for things they can't afford? This is a good step towards mortgage stability in Canada, but until people stop blaming financial institutions for their own irresponsibility, nothing will change.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.


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