You may have heard that down payment rules for mortgages are changing slightly.  I think this is a positive thing.

As explained in a couple of articles in the Dec 11, 2015 issue of the Globe and Mail, this increase in down payment is on a mortgage of between $500,000 and $1,000,000, and the change is from 5% to 10%, which will affect a small 1% of the market.  The change, which comes into effect on Feb 15, 2016, is ‘going to help create stability for the overall market by targeting pockets of risk,’ according to Finance Minister Bill Morneau.  Although it might make it harder for a certain group of people to buy a home in that price range, it’s better in the long run because it ensures that that group of people can really afford it and that the equity we all count on later in life will still be there. 

We are a society that largely relies on debt.  We use credit cards without a second thought and having a mortgage is the norm.  I remember years ago a friend of mine said their theory was to buy the most expensive home they could afford because they knew their incomes would continue to increase and it would become easier and easier to make those mortgage payments.  We can’t live like that now, but I’m afraid a lot of us do.  None of our jobs are guaranteed anymore and if you’ve stretched and taken on too much you may not be able to survive a loss of income.  Canada has been able to avoid what happened in the US housing market a few years ago, and it’s because we have stronger mortgage rules.  The government is helping us avoid disaster, in a way.

Will this have a negative impact on our real estate market?  I think it will be similar to what we experienced a few years ago when HST jumped from a 5% GST charge to the 13% HST charge on commission:  people who had a choice rushed out to get their house sold before the change came in to effect.  This is a less significant change, but I believe that there will be a small surge in sales from now until Feb 15th, but it won’t have any sort of lasting negative effect.

We’d love to hear your comments or questions.  Feel free to contact John Weber at John@JohnWeberTeam.com or by cell at 705-727-6111.  You can contact Christie Bond at Christie@JohnWeberTeam.com or by cell at 705-220-1152.