What impact would 10% minimum have on Canadians?

One big bank has suggested raising the minimum down payment for mortgages to 10%. Brokers weigh in

What impact would 10% minimum have on Canadians?
One big bank has suggested raising the minimum down payment for mortgages to 10%. Brokers weigh in.

“Cranking up the requirements on homes priced under $500,000 would have zero impact on average home prices, zero impact on the market as a whole, but a devastating impact on a few hundred, perhaps even a few thousand families and individuals across the country who cannot access gifted funds, who have scrimped and saved to get to 5% - only to have the goalposts moved … and to what end?” Dustan Woodhouse, a broker with Dominion Lending Centres, Canadian Mortgage Experts, said. “To protect those dastardly savers from driving up prices of sub 500K properties?”

The comment came in response to National Bank of Canada Chief Executive Officer Louis Vachon’s claim that 10% minimum mortgage requirements could help cool spiking housing prices.

“For the longest time, we had minimum 10 percent cash down and we had 25-year maximum amortization and that worked very well," Vachon, told Bloomberg. “I think over a period of time that’s where we need to gravitate back to."

However, Woodhouse argues such measures would cool a part of the market that doesn’t need it. That being targeted by first-time buyers.

“[First-time buyers] are the ones who want their hands around the lowest rung on the homeownership ladder,” Woodhouse told MortgageBrokerNews.ca, in reference to homes costing less than $500,000. “And they want to raise that ladder?”

Some may argue Vachon, a big bank executive, is out-of-touch with just how difficult it is for some to break into the market as a first-time buyer. That extra 10% could delay homeownership for years for certain people.

However, not all brokers believe raising the minimum to 10% would have a major impact.

“Most clients that come up with 5% can come up with 10%,” Iain MacFadyen, a broker with Dominion Lending Centres in British Columbia told MortgageBrokerNews.ca.

However, MacFadyen did acknowledge that first-time buyers would be the most affected.