What a Liberal Majority Means for the Mortgage Market
Sabeena Bubber • October 20, 2015
This article was originally published on
Canadian Mortgage Trends, a publication of the Canadian Association of Accredited Mortgage Professionals (CAAMP) on October 20th 2015.
The Liberal Effect
- Higher bond yields: Balancing the budget is not a priority for the Liberals until 2019. Trudeau is expected to go on a spending spree and bond traders aren’t keen about it. It suggests a greater supply of government debt and potentially higher long-term yields to come. That, of course, could mean at least slightly higher fixed mortgage rates than we’d otherwise see.
- A More Hawkish Poloz: The odds just dropped for a cut in prime rate. More spending by Ottawa puts less pressure on governor Stephen Poloz to stimulate the economy with rate cuts. The implied probability of a rate hike by next October has almost doubled, from 8% yesterday to 15% as we speak.
- Wider RRSP Access: The Liberals say they’ll open access to the RRSP Home Buyer’s Plan, particularly for homebuyers coping with significant life changes (divorce, death of a spouse, a sick or elderly family member, etc.) More access to down payment funds will prop up housing sales and home ownership slightly, and support home prices.
- More “Affordability”: The Liberal platform includes a review of housing policy in high-priced markets. The new government will “consider all policy tools that could keep home ownership within reach.” What that means, we’ll have to wait and see. It could definitely be positive for renters and income property investors, given the Liberals have promised to “direct CMHC…to provide financing to support the construction” of new rental housing.
- First-timer Support: Trudeau’s government will add more flexible programs for first-time homebuyers. This could mean any number of things, potentially even higher amortization limits for new buyers.
- New Blood at the DoF: The Liberals will be installing a new Minister of Finance, who has enormous power over housing regulation. Will he or she be as hands-off on mortgage policy as the outgoing Joe Oliver? We’re guessing not. We’ll likely have an answer by the time the Liberals release their first budget next spring.
Here’s more on the Liberal housing platform.
SHARE THIS ARTICLE
RECENT POSTS
Why the Source of Your Down Payment Matters More Than You Think When buying a home, most people focus on how much they need for a down payment. What often gets overlooked is that where the down payment comes from matters just as much to the lender . The source of your down payment affects approval, risk assessment, and how your mortgage is structured. Here’s why lenders care—and what you need to know. 1. Anti–Money Laundering Requirements Lenders aren’t just being cautious—they’re legally required to verify the source of your down payment. To comply with anti–money laundering regulations, lenders must document where every dollar of the down payment came from on every purchase. Acceptable Down Payment Sources Down payments can come from: Your own savings or investments Borrowed funds through an insured program (such as FlexDown) A gift from an immediate family member How You Prove the Source Personal savings: You’ll need bank statements showing the funds have been in your account for at least 90 days , or proof they were accumulated through payroll deposits or other acceptable sources. Borrowed funds: Any borrowed portion must be included in your debt service ratios , since you’re responsible for repayment. Gifted funds: A signed gift letter is required confirming the money is a true gift with no repayment obligation , along with proof the funds were deposited into your account. 2. Financial Suitability and Risk The source of your down payment also tells the lender a lot about your financial habits. Down payments coming from your own savings demonstrate: Positive cash flow The ability to save consistently Strong financial management This reassures lenders that you’re more likely to keep up with mortgage payments. If the down payment is borrowed or gifted, lenders may look more closely at the rest of your application to ensure the mortgage remains affordable. Why a Larger Down Payment Helps From a lender’s perspective, more equity equals lower risk. The more money you have invested in the property, the less likely you are to walk away from the mortgage. This reduces the lender’s exposure and can sometimes result in better terms. 3. Down Payment and Loan-to-Value (LTV) Your down payment directly establishes your loan-to-value ratio (LTV)—the percentage of the property’s value being financed. In Canada: Lenders can finance up to 95% of a property’s value The buyer must contribute at least 5% as a down payment Example: On a $400,000 purchase: Maximum mortgage = $380,000 Minimum down payment = $20,000 How the Source Affects LTV Property value must be genuine and independently supported. Lenders rely on appraisals and comparable sales—not artificial price inflation. If: The seller provides money back The buyer doesn’t bring the full down payment independently Funds move “behind the scenes” …the lender considers this a change to the LTV and may decline the mortgage. All financial details of the purchase must be fully disclosed. Non-disclosure is mortgage fraud , and lenders will not proceed if the numbers don’t align. Final Thoughts Lenders ask for detailed documentation about your down payment source for good reason—it affects legality, risk, and the structure of your mortgage. Understanding these rules upfront helps avoid delays, declined applications, and last-minute surprises. If you’d like to review your down payment options or talk through mortgage financing, feel free to connect anytime. I’d be happy to walk you through the process and help you plan with confidence.
This is a subtitle for your new post
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. While Canada's economic recovery is broadening, a new layer of uncertainty has entered the picture. Here is what happened and what it means for your mortgage.
