How Much Longer Will 5 % Down Payment be Available

Monday, June 1, 2020   /   by Sergey Korostensky

How Much Longer Will 5 % Down Payment be Available

The CEO of CMHC, Evan Siddall, recently made the news with comments before a parliamentary committee.( see link ) He made some noteworthy comments, about values, about renting versus owning, his views surprised me considering his job, and particularly about the wisdom for CMHC to continue with 5% down payment. It is hard to know what he was up to:

1.   Was he floating a trial balloon to gauge market reaction.

2.   Was he foreshadowing a change in government policy.

3.   Was he offering his personal opinion, albeit as a senior government official.

4.   Was he promoting the use of the government loan for down payment, the First Time Home Buyers Incentive, that has had negligible uptake since its introduction.

It is hard to know.

I think the prudent thing for Realtors, Mortgage Brokers, and home buyers to draw from this is: if you are planning on buying with 5 % down payment YOU MIGHT NEED TO ACT SOON !!  When a very high ranking government official, the CEO of CMHC, is suggesting getting rid of 5% Down Payment, pay attention. It is possible Mr. Siddall is only offering his opinion, and as the saying goes “about opinions, he has one”.


The Benchmark Qualifying rate was reduced this week to 4.94%. This rate is used to determine the maximum size of the mortgage. It is calculated by the Bank of Canada using the big-6 banks’ posted rates. The rate has dropped ¼ % this spring, and this new 10 basis point drop means roughly a 1% to buyers’ purchasing power. Not a big impact, but better that buyers have a few thousand dollars more in purchasing power than less.

Lenders are offering specials these days. Cash-back mortgages, three months free interest and other options can save Buyers a few dollars and/or help with cashflow short term.  Although not ideal for everyone, one of these programs might be the incentive your buyers need to make a decision to buy.

Mortgage rates, especially insured mortgage rates, are very low, historically low. This will not last. Someday the federal government’s unprecedented deficit spending to deal with their Covid Lock Down will come home to roost. We do not know what new government policies will be enacted to impact our industry, or how. We can only be certain that they will. So while rates are low, homes are affordable, buyers still have a window of opportunity to purchase a home with 5 % down, and with cash-backs to as low as 2% down.

We are always happy to help Realtors and Buyers. We have received many files this month that were declined by other Brokerages or Clients’ banks that we were able to get approved. While we of course prefer to see the deals first, if you have an application declined, we encourage you to give us the chance to find a solution for your Clients