5 things to know about the new mortgage rules

TORONTO – Homebuyers in Canada now face larger down payment requirements for properties over $500,000. The changes are intended to temper some of Canada’s heated real estate markets. Here are five things to know about the new rules:

Who’s affected: Primarily those shopping for a home in Toronto and Vancouver. First-time buyers in those cities will feel the pinch since they’ll be required to put down bigger down payments to get into the market. Those selling their homes in order to size up, especially in cities with hot housing markets, likely won’t feel the pain since they’ve built up equity in those properties.

Dollars and cents: For someone purchasing a $700,000 home — a common list price in Toronto and Vancouver — the minimum down payment required will rise by $10,000 to $45,000.

How the new 10% minimum down payment works »

Price impact: The influence over prices should be small given the narrow reach of the new rules, analysts say. In Toronto and Vancouver, where prices have climbed to historic highs, anyone who can’t make the bigger down payment will simply be elbowed out of the way by those who can, meaning there should be a minimal impact on prices, according to Robert Kavcic, senior economist at BMO Capital Markets.

Sales activity: Some analysts expected a surge in sales leading up to Monday’s changes, saying they would lure homebuyers who wanted to avoid making the bigger down payments. Royal LePage CEO Phil Soper says sales activity has been “boisterous” in Ontario, B.C. and Quebec in the first five weeks of this year, but he credits a relatively mild winter and low mortgage rates.

Previous measures: Between 2008 and 2012, four rounds of changes were made to tighten eligibility rules for new insurable loans. Among them: the minimum down payment was increased five per cent, the maximum amortization period was reduced to 25 years from 30, and the maximum insurable house price was limited to below $1 million.