Canada should consider requiring bigger mortgage down payments: CMHC

TORONTO – The head of Canada’s federal housing agency says regulators should explore the possibility of raising the minimum down payment required on a home as a way of easing affordability and reducing risk to the financial system.

READ MORE: ‘Sudden’ spike in interest rates could trigger housing crash, unemployment spike: CMHC

Evan Siddall, president and CEO of Canada Mortgage and Housing Corp., says that although politicians are tempted to help first-time buyers, low down payments fuel demand and lead to higher housing costs.

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Siddall says that ends up hurting the first-time buyers that the government wanted to help.

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Last year, Ottawa raised the minimum down payment on the portion of a home worth over $500,000 to 10 per cent.

READ MORE: CMHC issues ‘red’ warning for Canada’s housing market

Siddall said in a speech at the Bank of England’s offices in London that increasing the minimum down payment even further could help offset the effects of rock-bottom interest rates, which have encouraged borrowers to take on excessive mortgage debt.

He added that regulators should also explore the possibility of imposing a loan-to-income limit as Ireland, the U.K. and a few others have done.