CMHC Suggests to Raise Minimum Down Payments

CMHC Suggests to Raise Minimum Down Payments

Canada Mortgage and Housing Corp. head, Evan Siddall, has indicated that Canada should raise the minimum down payment to ease the housing affordability woes.

Last week, the Ontario Government said it would double the land-transfer tax exemption for first-time buyers to $4,000.  As discussed in last weeks blog, this is more of a smoke and mirrors tactic that distracts individuals from the main issue of taxing others in order for the exemption to work.

The politicians are tempted to have more first time buyers enter the market, but this could also be contributing to the problem.  Property values have been rapidly increasing over the past few years and CMHC is concerned that if the market shifts, home owners will be “underwater”.

We have already seen this happen with our US counterpart where a homeowner is having their mortgage exceed the value of the home. This has resulted in a lot of homeowners simply handing their keys back to the lenders and walking away.

Several banks have also raised their fixed mortgage rates to ease the market boom and Ottawa has supported the idea of raising the minimum down payment.  Although, if a decision has to be made to raise down payments then it will be CMHC that will do it, not Ottawa.

SO WHAT DOES THIS REALLY MEAN?

Simply put, CMHC and the government would like to slow down the real estate market and have the affordability of a home come down to a more reasonable level.  The idea of raising the minimum down payment is a good one.  This will ensure that Canadian home buyers will be a lot safer when purchasing a home for the first time.  Families will not be concerned over fluctuating markets as their mortgage will be kept at a more reasonable and affordable rate. In York Region and the surrounding GTA where prices for homes have exceeded $750,000, homeowners want to ensure that their best interests are being looked after and by raising the minimum down payment, CMHC is doing just that.

Source: The Globe and Mail

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