Mortgage policy changes?

There are rumours circulating again that the federal government may move to tighten mortgage insurance criteria.  This is prompted by a recent article in the Financial Post.
The housing market while busy is far from hot.  Vancouver and Toronto are seeing rapid price growth but this is mainly due to the restriction and the supply of building lots for new homes.  In both cases the issue is lack of supply not mortgage lending.  In other markets home sales and price growth have been moderate over the past several years.  The recent flutter of activity is due to the fall of mortgage rates to another all time low.
According to the Financial post the measures being considered are:
  • Increasing the minimum down payment from 5%
  • Shortening the maximum amortization prior from 25 years (possibly to 20 years)
  • Limiting mortgage insurance for high-priced home.
The article states that no decision has been made but changes are being considered.

Higher Down Payments

The Canadian Association of Accredited Mortgage Professionals (CAAMP) recently did a survey of those Canadians who had purchase a home during 2013 up to May 2015.  I n the report titled "A Profile of Home-Buying in Canada they asked :

"If the minimum down payment requirement was 10% instead of 5%, would you still have been able to afford to purchase your current residence?"
Six per cent of the buyers (or 35,000 per year out of 620,000 homebuyers) said they would not have been able to make the purchase.  A further 13% (80,000 buyers per year) probably would not have been able to buy a home.
The absence of these buyers 35,000 or more, from the market would have significant impact on the sales activity, leading to downward price pressure, and an impact on the Canadian economy.  House prices have an important role in consumer confidence and are a driver of job creation.
The loss of at least 25,000 first-time buyers would would have made it extremely difficult for move-up buyers to sell their existing homes.  This would have prevented their purchases.  The effect would be a much larger negative impact on the housing market and the broader economy.

Fortunately 62% of all buyers (380,000) definitely would have been able to make the purchase and a further 20% (125,000 buyers) probably would have been able to make the purchase.


Table 1:  Impact on Ability to Purchase Current Home if Minimum Down Payment was 10%

  1st Time Buyer 2nd Time Buyer

Subsequent Purchases

All Buyers
Definitely Able 130,000 85,000 165,000 380,000
Probably Able 75,000 25,000 20,000 125,000
Probably Not Able 50,000 10,000 15,000 80,000
Definitely Not Able 25,000 5,000 5,000 35,000
TOTAL: 280,000 130,000 210,000 620,000

Source: Survey by Bond Brand Loyalty for CAAMP; analysis by the author.
The results of the survey suggest the an increase in the minimum required down payment from 5% would have drastic consequences for the housing market and would negatively impact the broader economy.

To be continued...

If you have any questions on downpayments please call us 250 862 1806 or email [email protected].

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About the Author

Laurie Baird and Tracy Head are mortgage brokers with Verico Complete Mortgage Services. Together they have over 45 years of experience in the mortgage industry.

As mortgage brokers, Laurie and Tracy spend time getting to know the people they work with and help them understand the mortgage process. They support their clients before, during, and after a home purchase.

Laurie and Tracy are able to offer their clients advice and options. With access to over 40 different lenders, Laurie and Tracy are able to match the needs of their clients with the right mortgage package. They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit:

Visit Laurie's blog at: https://www.okanaganmortgages.com/blog

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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