Liberals change Mortgage Rules to avoid Housing Bubble

Finance Minister Bill Morneau announced that the government is raising the minimum down payment for a government-insured mortgage on houses valued between $500,000 and $1 million. (Government-issued insurance on homes above $1 million was eliminated last year.) The government is making the changes to cool the overheated housing markets in some of Canada’s largest cities.

Under the new rules, buyers will still need to put 10 per cent down on the portion of the house price above $500,000. The portion below that will still require just 5 per cent down. So on a house worth $700,000, the effective minimum down payment would be 6.4 per cent, or $45,000.

The new rules come into effect on Feb. 15, 2016.

The move is designed to target the hot property prices in Toronto and Vancouver. By leaving alone mortgages under $500,000, they are in effect attempting to leave alone most of the rest of Canada’s housing markets.

However, CIBC deputy chief economist Benjamin Tal indicates the city that will be hit hardest will be Calgary — “not exactly a city that needs additional cooling.”

Home sales in Calgary were down 36.4 per cent from a year earlier in October. The average price has fallen by about 5 per cent in the past year.

Tal says Calgary will be hit hardest because it has a particularly high number of “high-ratio” mortgages with 5-per-cent down payments.

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