Will 10% down payment be the new minimum requirement?

Welcome back! How time flies. Christmas 2009 has come and gone and we're already into February of the new year.

Several people have mentioned the reference to increasing the minimum 5% down payment to 10% while also discussing a decrease in amortization. The last major change with this regard was in October of 2008 when 40 year amortization alongside zero percent down payments were removed. At present time, a client may qualify for a 35 year amortization with a 5% down payment, which in this market, is a very decent sized down payment. Since the infamous "boom" in the Calgary housing market, 5% is no longer what it used to be. On a 300K house this is a 15K down payment which is a significant amount of money. Certainly many people would be forced out of the possibility of home ownership should the minimum requirement be moved up to 10%.

At present time this is strictly a rumor but I will post the link with supplemental information on this topic.

Flaherty has no plans to tighten mortgage rules: Globe and Mail

| Monday, 8 February 2010

Following a report in Saturday's Globe and Mail that banking officials have called for tighter mortgage rules to stave off a housing collapse, Finance Minister Jim Flaherty told reporters he does not see signs of a housing bubble in Canada.

According to the paper, Flaherty made the comments following the weekend's finance summit. Although he said there were some "signals in the market that are concerning," he added there is no "compelling evidence" of a housing bubble. He did, however, remind the Globe and Mail that he has policy tools available to "take action to counter negative trends."

"I have used some of them before and can use some or all of them again," Flaherty said, making reference to the government's decision to disallow zero-down mortgages and 40-year amortizations in 2008.

The discussion of tightening mortgage rules surfaced in December when Flaherty mentioned the possibility of increasing down payment and amortization periods to cool off the housing market. The Globe said the Department of Finance has canvassed the mortgage industry for ideas on whether tighter mortgage rules are needed.

CAAMP's Jim Murphy told the newspaper that it would have "serious concerns" with ten per cent down payments, while Canadian Mortgage Trends' Robert McLister said the CMHC has already "increased its vigilance" on mortgage insurance approvals.