Get ready for a housing market frenzy in Toronto and Vancouver over the next two months

The federal government is changing the rules on residential real estate down payments but giving consumers a two months heads up — and that should mean a stampede to beat the deadline.

“I think you will see some extreme activity in some markets,” said Doug Porter, chief economist with Bank of Montreal, referring to the red hot Toronto and Vancouver markets. The new rules take effect Feb. 15, 2016.

Ottawa is upping the minimum down payment for government-backed loans from five per cent to 10 per cent on the portion of a home selling for more than $500,000, a sale price that is fairly common in Toronto and Vancouver where the average transaction easily exceeds that amount.

The mad dash scenario almost always plays itself out when mortgage rates rise as consumers who have locked in their rates rush to take advantage of the lower rate they have guaranteed. Porter said the effect of down payment changes may be even more pronounced, when you factor in current rates and the unseasonably warm weather.

He noted that in the past, the Tories implemented changes and made them effective immediately. However, he added, the change in down payment rules is large enough that people probably needed an adjustment period.

“January home sales in Toronto and Vancouver could spike as people rush to get in before the 5 per cent down door closes,” said Rob McLister, founder of

The Toronto and Vancouver markets, which the new measures hope to cool, hardly need any more heat. The Toronto Real Estate Board announced this month it broke its yearly record for sales in November. In Vancouver sales were up 40 per cent year over year while the benchmark price for a home rose 17.2 per cent during the period.

Garry Marr | December 11, 2015 12:42 PM ET
Financial Post