New Federal Mortgage Rules Take Aim At Hottest Markets

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Finance Minister Bill Morneau announced Friday the government is increasing the down payment requirements for homebuyers seeking to purchase properties over $500,000. The move is designed to cool down the smoking-hot housing market in some of Canada's biggest cities. Here are five things to know about the changes:

Who's affected: Given Toronto and Vancouver are thought to be the targets of the new rules, first-time buyers in those cities — and perhaps their parents — will feel the pinch since they'll be required to cough up bigger down payments to get into the market. Those selling their homes in order to size up, especially in cities with hot housing markets, likely won't feel the pain since they've built up equity in those properties.

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.

Price impact: The influence over prices should be small given the narrow reach of the new rules, analysts say. In Toronto and Vancouver, where prices have climbed to historic highs, anyone who can't make the bigger down payment will simply be elbowed out of the way by those who can, meaning there should be a minimal impact on prices, according to Robert Kavcic, senior economist at BMO Capital Markets.

Sales activity: Kavcic also says the fact that the changes take effect in February could result in stronger-than-usual activity in the weeks to come, with Toronto's mild weather possibly contributing to a spree, as home-seekers try to get into the market before the new rules are put into place.

Previous measures: Between 2008 and 2012, four rounds of changes were made to tighten eligibility rules for new insurable loans. Among them: the minimum down payment  was increased five per cent, the maximum amortization period was reduced to 25 years from 30, and the maximum insurable house price was limited to below $1 million.


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