Canada’s finance minister said a tweak to the rules surrounding down payments in the real estate market is meant as a corrective measure, and it shouldn’t hurt first-time homebuyers.
Last week, Bill Morneau’s department announced that the minimum down-payment on a new home priced at over $500,000 would increase from 5 per cent to 10 per cent in order for the buyer to qualify for the requisite Canada Mortgage and Housing Corporation insurance.
Morneau said the adjustment was necessary.
“One of the very first briefs I asked the department of finance people to put forward when I got into my new role was the housing market,” he told The West Block’s Tom Clark. “We looked at a couple of pockets of risk, and specifically those pockets of risk were in Vancouver and in Toronto where the cost of housing is going up more rapidly than incomes.”
But will cooling the market in this way just end up hurting the people that the Liberals have said they want to help most: middle class earners?
CALCULATE: How much will you need to save for a house now?
“It doesn’t (improve the situation for the middle class), but it creates a more stable housing market, which is better for all Canadians,” Morneau argued.
“We don’t want to stop the opportunities for first-time homebuyers, because we’re not impacting those homes under $500,000 at all. The down-payment there will stay at five per cent.”
The problem for many first-time purchasers, however, is that the price for even a modest family home in a city like Vancouver or Toronto can easily exceed $500,000.
Balancing the books
Morneau was also asked about the quandary that has plagued his government since it officially took power last month: how to balance the federal budget within the next four years while keeping deficits under $10 billion, as promised.
Adding to the fiscal challenge is the fact that Morneau himself has admitted that the Liberal tax hike on the top one-per-cent of earners will not be enough to compensate for tax reductions aimed at the middle class.
“When we tell people that there’s a difference between those two numbers, it’s really about being prudent and saying to the extent that this is going to cost a little bit more,” the finance minister told Clark. “We want people to know, we need to factor that into our plan over the course next few years.”
The Liberals say they will continue to invest heavily in infrastructure projects to stimulate economic growth, Morneau said.
“We’re going to make these investments while still lowering the net debt to GDP ratio over the course of our mandate.”
WATCH: Tom Clark takes you through the federal deficit numbers and what it means for gross domestic product.
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