Canada is planning to increase the maximum that can be borrowed on a high ratio mortgage.
High ratio mortgages are those where the buyer puts down less than 20% on the purchase price.
If the proposed changes go through, this will increase by 25% from $1 million to $1.25 million.
While this may sound beneficial to the average home buyer, particularly in the Greater Victoria area where home prices over $1 million dollars are more common than not, for buyers to take advantage of this increase they would need a household income of at least $155,000 per year and a minimum down payment of $250,000.
Furthermore, when the government is offering up to 25% more funds, the seller is now obligated to extract these additional funds. The increased credit gets capitalized into the home price and, in turn, pushes prices even higher.
A large portion of home buyers are first-time home buyers and this will affect them negatively as it pushes the cost of affordable housing up.
Housing affordability is already out of reach for many homebuyers, particularly first-time buyers, in Canada and this increased borrowing may not work in our favour.
You can learn more about this proposed increase at: https://betterdwelling.com/canada-plans-to-foster-its-real-estate-bubble-by-raising-the-maximum-mortgage-size/?utm_source=Better+Dwelling+Website+Signup&utm_campaign=f1bc874b58-fras_jan_112018-3094981_COPY_01&utm_medium=email&utm_term=0_bde8feedee-f1bc874b58-309114821