Today Finance Minister Bill Morneau announced changes to down payment requirements. Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from five per cent to 10 per cent for the portion of the house price above $500,000. The five per cent minimum down payment for properties up to $500,000 remains unchanged.
Mortgage Professionals Canada Chief Economist, Will Dunning, is reviewing the full impact of this down payment increase - in particular, on first-time buyers. We will provide further analysis as it becomes available.
In our Fall Report, Dunning discusses why raising the down payment could cause problems for the housing market, including this cautionary observation: "Rising prices have made it increasingly difficult for first-time homebuyers to accumulate down payments. Increasing down payment requirements would, most likely, severely dampen housing demands from people who are financially well-qualified to make their monthly mortgage payments."
We note that the 10% requirement does represent a graduated approach. We are disappointed, however, that this decision was taken without any formal industry consultation.