Canada Takes Steps to Contain Housing-Market Risk

At a press conference in Ottawa, the minister said that as of February 15, buyers purchasing homes between $500,000 and one million dollars will have to make a minimum down payment of 5 per cent on the first $500,000, and 10 per cent of the dollar value above that amount.

As most Canadian mortgages - roughly 35 per cent - are not backed by government insurance, and over 90 per cent of government-insured mortgages are for properties valued below $500,000, Morneau's measure is unlikely to significantly temper Canada's overheating property market but could keep some homebuyers from overextending their positions.

"You know, we are taking measured approaches to make sure we protect Canadians", he replied.

"The motivation to the policy is clear", he wrote in a report that was released prior to Morneau's Friday morning announcement, and based on unidentified "sources".

"I don't look at what's going on here and say, 'Gee, this is a market that's really being driven by first-time buyers bidding insane numbers to get into the housing market'".

In Vancouver that ratio is 33% and in Toronto it's 40%.

The average price of homes sold in October 2015 through the Canadian Real Estate Association's Multiple Listing Service system was about 453,000 Canadian dollars, up 8 percent year on year, which was supported by low lending rates.

"Note that the largest impact (close to 10%) will be on Calgary (due to its relatively large share of high-ratio mortgages)-not exactly a city that needs additional cooling".

The office of the Superintendent of Financial Institutions said it will consult on and "update" regulated capital requirements for residential mortgages held by federally-regulated lenders, like banks, trust companies and credit unions, and for private mortgage insurers.

"We're seeing the markets kind of take care of that on their own", he said.

Morneau also highlighted the increases in guarantee fees for Canada Mortgage and Housing Corporation (CMHC)-sponsored securitization programs, announced on Friday by CMHC.

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