Mortgage rules requiring more than 5% down on Canadian homes over $500K kick in today

Today is the first day you'll need to put upwards of five per cent down on a home selling for more than $500,000 in Canada.

The new mortgage rules, announced last December by Finance Minister Bill Morneau, dictate that buyers must put down 10 per cent down on the portion of the home's price above $500,0000

The move's intended to keep housing prices affordable for anyone wishing to enter some of Canada's hottest real estate markets, like Toronto and Vancouver.

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Buyers can still put down five per cent for homes $500,000 and under. For example, if you want to buy a $750,000 home, you'll need to have a minimum down payment of $50,000, which is what you get when you add five per cent of $500,000 and 10 per cent of the remaining $250,000. 

Homes that cost more than $1 million still require a 20 per cent down payment.

I think it's a good idea. I'm concerned with the value of properties these days.- Michael Elmenhoff, Toronto broker

Phil Soper, president and CEO of Royal LePage, said the new rules target the rapid pace of price growth in red-hot markets without hurting those that are lagging.

"The problem with monetary policy is that it impacts the struggling Calgary market or the just fine Winnipeg market and the overheated Vancouver market in equal amounts," Soper said.

"If you lower interest rates, you lower interest rates for all. And that's not what the country needed. This change ... is the first attempt to recognize the fact that some parts of the country are in need of a mild tap on the break, while other parts of the country really need to continue to receive stimulus."

New rules 'drove traffic'

Toronto real estate agent Sonya Côté said first-time homebuyers were feeling the pressure to put their five per cent down on homes while they still could. 

"Coming up with $3,000 or $5,000 or $7,000 more for a down payment to get in there for the first time is a lot of money for first-time buyers," she said. 

The rules change meant Côté was able to sell a row house that hasn't been renovated, and with no parking, in a week.

"That drove traffic through this place like a circus," she said of the new regulations. "We had 103 showings, 13 offers and it went for $149,000 over asking."

The agent predicted real estate traffic will slow now with first-time buyers facing stricter regulations. 

More eyes on condos?

Toronto broker Michael Elmenhoff told CBC News he supports the change because of the way home prices have been skyrocketing lately. 

"I think it's a good idea. I'm concerned with the value of properties these days," he said, adding buyers may have to rethink their objectives moving forward.

"I think we're going to see more pressure on the lower price condos as a result of that," Elmenhoff noted.

Soper said real estate markets in Ontario, B.C. and Quebec have been "boisterous" in the first five weeks of the year — but added it's unlikely that the new mortgage rules are responsible.

"I think it has much more to do with clean sidewalks from a mild winter and low mortgage rates than it does with impending changes that tweak mortgage insurance regulations," Soper said.

"It's just not a big enough change to have materially impacted home sales volumes in the country," he acknowledged.

"We recognize that, specifically in the Toronto and Vancouver markets, we have seen house prices that have been elevated," Finance Minister Bill Morneau said last December.

"We're not talking about bubbles here, we are talking about ensuring that Canadians take the right approach to investing in a home," the minister noted. 

"We want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home."