The Impact of Ottawa’s New Mortgage Rules

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The Impact of Ottawa’s New Mortgage Rules

It didn’t take long for new Finance Minister Bill Morneau to shake things up.

The announcement that caught so many Torontonians off-guard? The new down payment requirements for homes priced over $500K.

In an effort to cool the country’s most expensive housing markets, certain homebuyers will now need a bigger down payment. The current five per cent down is still in effect for mortgages up to $500K, but increases to ten per cent for the portion between $500K and one million dollars.

As of February 15th 2016, all lenders will require this higher down payment for new purchases. When mortgages are for more than 80 per cent of a property’s value, banks require homebuyers to purchase insurance from the Canada Mortgage and Housing Corporation (CMHC). This CMHC insurance protects the bank if the homeowners don’t meet their mortgage payments. The higher down payment amount will now be required by the CMHC in order to qualify for a mortgage.

It’s important to note that the new rule is not retroactive – homeowners who bought before February with only five per cent down don’t need to come up with extra cash.

A Look at the Numbers

So what does this ten per cent increase really look like? Since it’s only on the portion between $500K and one million dollars, those buying a home priced below $500K won’t see any change. A $600K home will now require a $35K down payment, up from $30K. Or for an $800K home, the down payment amount goes up to $55K, instead of the old $40K requirement.

Looking at a home worth more than one million dollars? Mortgage rules already require a twenty per cent down payment, which will remain in effect.

Is the Federal Government Worried About a Real Estate Bubble?

So far, the government isn’t raising alarm bells about a Canadian housing bubble. They are, however, taking steps to cool things down a little.

Why the new rules? When asked, Finance Minister Bill Morneau gave the following statement: “We recognize that, specifically in the Toronto and Vancouver markets, we have seen house prices that have been elevated, and we want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home.”

CREA Speaks Up: New Rules Could Affect the Canadian Housing Market


The Canadian Real Estate Association (CREA) is concerned housing sales may see a decline in 2016, due in part to the new mortgage rules. In a recent Financial Post article, the CREA stated that 2015 home sales were at an eight year high. New down payment requirements may cool the market, especially Ontario and British Columbia.

CREA is predicting a 1.1 per cent decline in overall sales for 2016. But even under the new rules, they are still forecasting a small increase in sale prices, up 1.4 per cent for this year.

Wondering how the new rules will affect you directly? Have a mortgage related question? We’re always happy to help! Please visit our homepage for more information, or call us directly at 416-639-0786.