Mortgage rules requiring more than 5% down on Canadian homes over $500K kick in today

Today is the first day you'll need to put upwards of five per cent down on a home selling for more than $500,000 in Canada.

The new mortgage rules, announced lastDecember by Finance Minister Bill Morneau, dictate that buyers must put down 10 per cent down on the portion of the home's price above $500,0000

The move's intended to keep housing prices affordable for anyonewishing to entersome of Canada's hottest real estate markets, like Toronto and Vancouver.

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Buyers can still put down fiveper cent for homes $500,000 and under. For example, if you want tobuy a $750,000 home, you'llneed to have a minimum down payment of $50,000,which is what you get when you add fiveper cent of $500,000 and 10 per cent of the remaining $250,000.

Homes that cost more than $1 million still require a 20percent down payment.

I think it's a good idea. I'm concerned with the value of properties these days.- MichaelElmenhoff, Toronto broker

Phil Soper, president and CEO of Royal LePage, said the new rules target the rapid pace of price growth in red-hot markets without hurting those that are lagging.

"The problem with monetary policy is that it impacts the struggling Calgary market or the just fine Winnipeg market and the overheated Vancouver market in equal amounts," Soper said.

"If you lower interest rates, you lower interest rates for all. And that's not what the country needed. This change ... is the first attempt to recognize the fact that some parts of the country are in need of a mild tap on the break, while other parts of the country really need to continue to receive stimulus."

New rules 'drove traffic'

Toronto real estate agent Sonya Ct said first-time homebuyers were feeling the pressure to put their fiveper cent down on homes while they still could.

"Coming up with $3,000 or $5,000 or $7,000 more for a down payment to get in there for the first time is a lot of money for first-time buyers," she said.

The rules change meant Ct was able to sell arow house that hasn't been renovated, andwith no parking,in a week.

"That drove traffic through this place like a circus," she said of the new regulations."We had 103 showings, 13 offers and it went for $149,000 over asking."

The agent predicted real estate traffic will slow now with first-time buyers facing stricter regulations.

More eyes on condos?

Toronto broker Michael Elmenhofftold CBC News he supports the change because of the way home prices have been skyrocketing lately.

"I think it's a good idea. I'm concerned with the value of properties these days," he said, addingbuyers may have to rethink their objectives moving forward.

"I think we're going to see more pressure on the lower pricecondos as a result of that,"Elmenhoff noted.

Soper said real estate markets in Ontario, B.C. and Quebec have been "boisterous" in the first five weeks of the year but added it's unlikely that the new mortgage rules are responsible.

"I think it has much more to do with clean sidewalks from a mild winter and low mortgage rates than it does with impending changes that tweak mortgage insurance regulations," Soper said.

"It's just not a big enough change to have materially impacted home sales volumes in the country," he acknowledged.

"We recognize that,specificallyin theTorontoand Vancouver markets, we have seen house prices that have been elevated," Finance Minister BillMorneausaid last December.

"We're not talking about bubbles here, we are talking about ensuring that Canadians take the right approach to investing in a home," the ministernoted.

"Wewant to make sure we create an environment that protects the people buying homes so they havesufficientequity in their home."