Feds make changes to down payment rules for high end homes

The newly elected government is taking a three-fold approach towards reforming the housing market. It has changed the down payment rules for houses priced over $500,000. There are increases to the fees charged to lenders that securitize government backed mortgages there are changes that allow lenders to hold more capital against some insured loans in order to curb mortgage fraud and to slow rising levels of household debt.

Takeaway: These are significant changes, however, the Liberal government has stressed that its new rules are aimed to affect only the higher-priced properties in the most expensive markets, particularly Toronto and Vancouver, in contrast to previous changes that were aimed at the entire Canadian housing sector. It will be curious to see whether the change has an effect.

Negative interest rates in Canada?

Central bank governor Stephen Poloz may consider moving the bank’s benchmark interest rates below zero and is confident that Canadian financial markets could also function in a negative interest rate environment. The Bank of Canada twice this year cut its benchmark interest rate in an attempt to stimulate the economy. But other countries have gone even further, slashing their rates below zero in an attempt to encourage spending and investment.

Takeaway: That doesn’t mean that Canadian consumers would actually see negative interest rates. Remember, prime is a premium to the overnight rate However, he did say that the lower limit for Canada’s policy rate at this time is around minus 0.5 per cent, but it could be a little higher or lower. Could that mean another round of interest cuts? I believe that depends on what the next quarterly report reports say about the country’s growth.

Canadian housing starts and building permits show strength

Housing starts rose unexpectedly in November and building permits surged in October, fuelling Canada’s already prolonged housing boom. According to a CMHC report, groundbreaking on new homes jumped to 211,916 units last month from a downwardly revised 197,712 units in October, bucking expectations.

Takeaway: Home building activity remains robust. Like the resale market however, the real strength is concentrated in a few local areas.

Opinion: Despite the new down payment rules, the housing market in most areas looks promising going into 2016 and through to 2017.