A new round of mortgage rule tightening will increase the minimum downpayment required for some homes effective February 15, 2016 across Canada.
The downpayment for properties up to $500,000 will remain unchanged at 5 per cent. However, 10 per cent will be needed for anything in excess of $500,000.
For example, a $700,000 home would require a $45,000 downpayment:
5 % of $500,000 = $25,000
10% of $200,000 = $20,000
Total = $45,000 or 6.4% downpayment
These new measures intend to cool the Vancouver & Toronto markets – but here’s the rub: CIBC expects Calgary to be hardest hit.
Remember, homes above $1 million already didn’t qualify for high-ratio insurance and downpayments needed to be at least 20 per cent. So in reality, the new mortgage rules will only affect homes with prices in the $500,000-$999,999 range.
With that in mind, CIBC expects only 5% of Toronto homes and 2.5% of Vancouver homes will face any effects to the changes.
CIBC found Calgary has the largest share of units valued between $500K and $1 million with a high-ratio mortgage.
Ten percent of Calgary home sales are expected to be impacted by the updated rules, the highest proportion in the cities analyzed by CIBC.
Instead of cooling down Canada’s hottest markets, this new change could exacerbate an already correcting Calgary market.
To download the CIBC report, click here
To read the Dept. of Finance Canada news release, click here