According to an unidentified but high level lender source connected to the Department of Finance recently stated that the department may recommend that the minimum down payment be increased to 10%. Policy makers are reportedly considering implementing a graduated scale based on either home value or mortgage amount that would look something like this:
- $0 to $500,000 requires at least 5% down
- $501,000 to $700,000 requires at least 7% down
- Over $700,000 requires 10% down
Though these numbers are purely speculative this methodology would mean two things for Canadian home buyers:
- First time buyers would be insulated, since their mortgages tend to fall in the first category and amount to less than $500,000 on average.
- Smaller markets would be shielded since they haven’t seen the extremely high home prices common in hot markets like Vancouver and Toronto
Mortgage Professionals Canada researches suggest that up to 115,000 recent buyers may not be able to afford the high down payment rate of 10%, causing them to have to defer purchases. By creating a graduated scale the Department of Finance could increase the minimum down payment while still shielding weaker housing markets and young home buyers.
If the Department of Finance does make its recommendation to Minister of Finance Bill Morneau then Morneau would need to consider the political and economic implications of this move, which could be significant. He seems likely to side with senior policy makers and implement a higher minimum down payment sometime in 2016.
Ahead of a formal public announcement this is all speculation, but if higher down payment rules are implemented they would not require a public comment period and could be implemented relatively quickly.
Tim Lacroix of Canada Mortgage Direct has been helping Calgarians achieve their home ownership dreams for years. To find out how he can help you call today at 403.648.1541 and visit timlacroix.com