Finance Minister Bill Morneau is increasing the amount homebuyers must put forward as a down payment on houses over $500,000.
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The intent is to force prospective real estate purchasers of higher priced homes to save more before making a purchase, while experts suggest the main aim of Friday’s announcement is to tap the brakes on the red-hot markets of Vancouver and Toronto, where average prices have soared well above the half-million dollar mark.
“Targeting higher-price properties will minimize the impact on many first-time home buyers and (on) regional housing markets where activity is more moderate, while limiting risk and taxpayer exposure to the elevated housing markets in Vancouver and in Toronto”, he said in a sttement.
Dollars and cents: For someone purchasing a $700,000 home – a common list price in Toronto and Vancouver – the minimum down payment required will rise by $10,000 to $45,000.
And they will not touch homes worth more than C$1 million, since 20 percent down payments are already required. If the house costs $600,000 a 10 per cent charge is levied only on the extra $100,000, bringing the minimum payment to $35,000.
The new regulations will come into effect on February 15, 2016.
“The government’s role in housing is to set and maintain a framework that is equitable, stable and vulnerable”, Morneau said.
Morneau’s move today was part of a three-pronged effort to protect Canada from the potential impact of an expanding housing market price bubble that bursts.
A big change in the works for home buyers in Canada.
The moves are being made to make homebuyers put more equity into their purchases rather than relying on record-low mortgage rates.
“Hot markets in Ontario and B.C. are being driven by purchasers with larger down payments, whether it be millennials getting help from their parents, move up buyers, and/or domestic or foreign investors”, said Burleton.
That ratio has been flipped in 2015, with conventional, uninsured mortgages now accounting for 60 per cent, according to TD.
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The Bank of Canada has also expressed concerns that too many Canadians risk becoming over-extended, especially once interest rates begin to rise.
