Liberal Government Tightens Mortgage Lending Criteria

Blog by Arnold Shuchat | December 11th, 2015

The Liberal Government just announced effective February 15, 2016, that the minimum downpayment for any home over $500,000 will be increased from 5% to 10% in an attempt to cool Vancouver and Toronto housing markets. 

One has to question the motivation for this rule.  It will not make it easier for new homeowners to purchase a property in the Vancouver or Richmond housing markets. It will not affect foreigners' abilities to buy homesover $500k but it will remove domestic competition against those foreign buyers.  Foreigners are usually putting at least 35% down and are not usually attempting to secure insured mortgages from CMHC.  Locals are more likely to be affected from these changes. It looks to me that the principal behind this has more to do with limiting the possible insurance costs to CMHC, a government body, in the event of a market downturn than it does to being aimed at helping Canadians buy homes under the CMHC mortgage programs.

This change will only limit the ability of locals to sell their lower end housing units as there will be fewer buyers with the requisite 10% minimum downpayment on hand.