Feds increase minimum down payment for homes over $500,000

The new measure is designed to cool off the booming real estate market

OTTAWA – Finance Minister Bill Morneau is increasing the amount homebuyers must put forward as a down payment on houses over $500,000.

It’s a move designed to cool off the booming real estate market in some of Canada’s biggest cities.

Homebuyers will have to put 10 per cent down on the portion of the price over $500,000.

Anything under $500,000 will still only require a five-per-cent down payment.

“This will impact one per cent or less of the market,” Morneau told a news conference.

Morneau says the new measure is aimed at expensive homes while still encouraging first-time homebuyers to get into the market.

The stiffer down payment requirement is one of three new measures targeting the stability of the housing market.

Financial institutions will face new capital requirements to keep pace with the growing risk of the real estate markets they bankroll.

And Canada Mortgage and Housing Corp. will change the fees it charges issuers of mortgage-backed securities.

“The government’s role in housing is to set and maintain a framework that is equitable, stable and vulnerable,” Morneau said.

The Finance Department has tightened mortgage rules on several occasions in recent years — along with requiring stricter enforcement and management of loans — in an effort to weed out marginal buyers and excessive speculation in the housing market.

One of the changes saw the federal government reduce the maximum amortization period for government-insured mortgages to 25 years from 30 years.

The Bank of Canada has also expressed concerns that too many Canadians risk becoming over-extended, especially once interest rates begin to rise.