Low down payments are ultimately detrimental to first-time buyers - CMHC head

The head of the Canada Mortgage and Housing Corp. (CMHC) said that contrary to the popular conception of providing greater access to residential properties, low down payments are ultimately harming first-time buyers.
“Politicians are tempted to help first-time homebuyers enter the market, but low down payments may be part of the problem, adding to affordability pressures and macro-economic vulnerabilities,” CMHC president Evan Siddall said, as quoted by BuzzBuzzNews.
In a recent speech at the Bank of England’s offices in London, Siddall argued that regulators should begin considering increases to the minimum down payment to counteract the grave risk introduced to Canada’s housing sector by the massive increases in borrowing and demand—both precipitated by record-low interest rates.
Siddall added that regulators should look into implementing income-based limits on the loan sizes that debtors could qualify for. Such a measure would complement the stricter stress test recently introduced by Finance Minister Bill Morneau (which measures a borrower’s ability to service a mortgage on a 4.64 per cent 5-year fixed rate) and last year’s raise on the minimum down payment of a home worth over $500,000 to 10 per cent.
“We expect that these macro-prudential policy changes will moderate demand for housing in Canada's housing markets, limiting price increases and making houses more affordable,” Siddall said.

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