TORONTO – The head of Canada’s federal housing agency says regulators should explore the possibility of raising the minimum down payment required on a home as a way of easing affordability and reducing risk to the financial system.
Evan Siddall, president and CEO of Canada Mortgage and Housing Corp., says that although politicians are tempted to help first-time buyers, low down payments fuel demand and lead to higher housing costs.
Siddall says that ends up hurting the first-time buyers that the government wanted to help.
Last year, Ottawa raised the minimum down payment on the portion of a home worth over $500,000 to 10 per cent.
Siddall said in a speech at the Bank of England’s offices in London that increasing the minimum down payment even further could help offset the effects of rock-bottom interest rates, which have encouraged borrowers to take on excessive mortgage debt.
He added that regulators should also explore the possibility of imposing a loan-to-income limit as Ireland, the U.K. and a few others have done.
Follow @alexposadzki on Twitter.