Rule changes may push more homebuyers in Canada into cheaper condominium market

Canada’s move to tighten mortgage rules and raise some fees on lenders will likely make it more expensive for consumers to borrow, but could boost one of the most vulnerable segments of the market – Toronto’s big supply of condominiums.

Property agents, mortgage brokers and economists said the move to raise the minimum down payment on expensive properties and boost fees for mortgage insurance may have little impact on Canada’s housing market as a whole, but puts cash-strapped consumers in Toronto and Vancouver in the cross-hairs.

The new measures will require buyers who need government-insured mortgages to make down payments of up to 7.5 per cent on homes worth C$500,000 to C$1 million, up from 5 per cent – a price point that targets entry-level homes in Canada’s two largest housing markets.

“Cash-poor buyers will be funnelled into less expensive properties which, in Toronto, means the more affordable condominium market,” said Toronto estate agent Steve Fudge.

“This … creates a larger pool of buyers to support the exponentially larger supply of condominiums in Toronto,” said Fudge.

But while condos in Vancouver and Toronto may become increasingly the default option for the lower end of the housing market, the higher costs are expected to push some would-be buyers out of the market, economists said.