The Government of Canada announced new mortgage financing rules on December 11, 2015 which will affect home purchasers. Effective on February 15, 2016, the minimum down payment limits will change as displayed in the following table:
|Minimum Down Payment by Purchase Price||Existing Eligibility Rules||Eligibility Rules Effective February 15, 2016|
|Home Purchase Price||Minimum Down Payment Percentage||Minimum Down Payment Amount||Minimum Down Payment Percentage||Minimum Down Payment Amount|
|$500,000 and below||5.00%||up to $25,000||5.00%||up to $25,000|
|$1,000,000 and above||20.00%||$200,000 and up||20.00%||$200,000 and up|
The government is attempting to achieve 2 objectives, in my opinion. Firstly, it wants to slow the pace of price increases, particularly in the greater Vancouver and Toronto areas, where it’s almost impossible for entry-level home owners to buy affordable housing. Secondly, it’s attempting to slow down the pace of speculation by investors who have to a certain degree driven up the price of housing in these centres as they seek safe havens with reasonable returns on their investment dollars.
These measures will certainly slow the pace of sales after mid-February, much to the dismay of the real estate sales sector. However, look for banner sales figures between Monday, December 14th and February 15, 2016 as many people attempt to get into the market before the rules change.
Mortgage lenders will be happy. Even though the new rules will affect new mortgage fundings, on the other hand, the greater equity that home purchasers will invest will translate into lesser mortgage default rates.