Parliament passed new financial services legislation (Bill C-37) at the end of March, which included a measure to lower the required down payment for mortgages. The requirement for mortgage default insurance dropped from 25 per cent to 20 per cent effective April 20th.

The Bank of Montreal says homebuyers could save an average of $2,500 in insurance premiums, based on an average home price of $300,000. “We see a number of customers scrambling to meet the 25 per cent down payment, in order to avoid paying the insurance premium,'' said Cid Palacio, Vice President, Bank of Montreal. “These changes will allow those homebuyers to reduce their down payment and get into their new home faster.''

The new limit also affects individuals who intend to refinance their mortgages. RBC Royal Bank said a recent survey it did found 39 per cent of Canadians have borrowed against the equity of their home, by either refinancing their mortgage to a larger amount, or by taking out a home equity line of credit.

“Now, with refinancing at 80 per cent, we're making an extra five per cent equity available to our clients for their financing needs,” said Catherine Adams, RBC Royal Bank's vice-president, Home Equity Financing.

Under the existing Bank Act regulations, which have been in place for 40 years, a bank cannot provide a mortgage loan for more than 75 per cent of the value of the property, without having the customer purchase mortgage insurance. Bill C-37 raises the loan-to-value ratio requiring mortgage insurance from the current 75 per cent to 80 per cent.