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New mortgage rule might ‘temper’ hot markets, but not for long

New mortgage rule might ‘temper’ hot markets, but not for long

Starting Feb. 15, mortgage insurers require 10% down payment on portion of mortgages above $500K

Vancouver and Toronto saw real estate prices, particularly for detached and semi-detached home, continue to rise last year. Most other markets saw only modest increases, or even decreases in some cases.

Vancouver and Toronto saw real estate prices, particularly for detached and semi-detached home, continue to rise last year. Most other markets saw only modest increases, or even decreases in some cases. (Mark Blinch/Reuters)

Beginning next week, many Canadians hoping to buy an abode will need to put more cash down before they can call it home. The extra cost might keep some would-be homeowners from mortgages they can’t really afford, but it’s unlikely to leave any lasting impressions on the country’s most “overheated” real estate markets.

The federal government announced in December that mortgage insurers, including the Canada Mortgage and Housing Corporation — by far the largest in the country — will require a 10 per cent down payment on any portion of a mortgage it insures above $500,000 and up to $999,000.

That’s double the five per cent down they currently ask to insure mortgages worth more than 80 per cent of a home’s value.

“We want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home,” said Finance Minister Bill Morneau at the time, also noting that “elevated” house prices were the driving force behind the move.

The change will “likely impact a broad spectrum of buyers,” though it will surely be the highest hurdle for those who don’t already have a good bit of equity from one home already.

“The majority of the impact is going to be on first-time homebuyers, particularly first-time buyers in the hotter markets,” says Don Campbell, senior analyst at Real Estate Investment Network, an organization that tracks Canadian housing trends.

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