82% of Sooke Home Sales Unaffected By Federal Mortgage Insurance Rule Changes
This morning, federal finance minister Bill Morneau announced changes that his Liberal government is making to CMHC-backed mortgages in this country. The changes were hinted at by well known Canadian Mortgage Trends blogger Robert McLister back on December 1st. The actual changes aren’t quite what he had predicted, but are pretty close.
The Short Version
- Current down payments required are 5% for homes up to $1 million
- New requirements: 10% on homes over $500,000 on the portion over $500,000
- Down payments on homes below $500,000 not affected
- 82% of sales this year in Sooke would not be affected
- Rules go into effect February 15, 2016
The government will raise the minimum down payment requirement for homes over $500,000 from its current 5% to 10% for the portion of the purchase over $500,000. So a $650,000 home would have a down payment of 5% on the first $500,000 ($25,000) and 10% on the remaining $150,000 ($15,000) for a total required down payment of $40,000, instead of the $32,500 required today.
The supposed rationale behind all this is to cool the housing market and increase owner equity in areas such as Toronto and Vancouver. Once again, the government has moved to cool the market in some areas by throwing a wet blanket over the entire country. In many markets, this won’t make a difference, since most homes are under the $500,000 threshold. In others that are already going through a slowdown (such as Calgary), it will probably cause further devaluation. I don’t believe it will make any difference in Toronto or Vancouver, since many of the homes there are already over $1 million, which is the limit for CMHC insurance and therefore already require 20% or more down payment.
Here in Sooke, fully 82% of sales (79% of single family homes) since January 1 have been under $500,000 and thus won’t be affected by the new rule changes. Currently, there are 94 single family homes available for purchase in the Sooke area that are under $500,000, including 54 under $400,000.
If you’re considering making a move in the coming year, give me a call at 250-885-0512 or send me a message and we can work out a plan of action whether or not you’re looking above or below $500,000.