New rules for mortgages will help protect first-time homebuyers, but will also make it more difficult to get into the real estate investment market, say market insiders.

Okotoks realtor Sheryl Lauinger said the new rules will not be an issue for homebuyers, but the requirement for a higher down payment will make it more difficult for people who want to invest in real estate.

“I don’t think it’s a bad thing. It will help to ensure they aren’t going in over their head, should interest rates go up when their mortgage matures,” she said.

Okotoks realtor Sheryl Lauinger said the new rules will not be an issue for homebuyers, but the requirement for a higher down payment will make it more difficult for people who want to invest in real estate.

Under the new mortgage rules announced by federal Finance Minister Jim Flaherty last week:

• All borrowers will be required to meet the standards for a five-year, fixed rate mortgage, even if they select a mortgage with a lower interest rate and shorter term.

• The maximum amount Canadians can refinance their homes for will drop to 90 per cent of the home’s value, from 95 per cent.

• A minimum 20 per cent down payment will be required to qualify for government-backed mortgage insurance on any non-owner occupied property.

The changes will come into affect on April 19. Some exceptions will be allowed where necessary to satisfy a purchase and sale, financing or refinancing agreement started before April 19.

Lauinger said the requirement for people to qualify for a five-year mortgage will protect first-time homebuyers so they don’t end up saddled with a mortgage they can’t afford if interest rates rise.

However, she said it will likely push some people who might currently be able to buy out of the market.

She predicts a rush to buy among first-time buyers who wouldn’t qualify under the new rules before April 19.

Lauinger said the new rules regarding refinancing mortgages will also help to reduce the amount of risk people could face.

However, she said the change to a higher down payment will likely push some people out of the investment market.

“I think it will have a fair bit of effect, because 20 per cent is quite a high down payment as opposed to five per cent. I think that will affect people who are looking for revenue properties,” she said. “That’s a 15 per cent difference, which is quite substantial.”

Lee Coates, who lives in Calgary and owns properties in Okotoks, said he doesn’t expect the change to have much impact on him if he buys more properties in the future.

He said he pays 25 per cent down payments for non-government-backed mortgages.

“It will affect the single property owners,” he said.

He said government-backed mortgages are good for anyone getting into real estate investment, but it’s a “whole different sand box” for anyone with a number of properties.

He said it could open new opportunities for wraparound mortgages and contracts for sale.

“You can basically be the bank and lend money to the people buying a property off us,” he said. “There’s going to be more people like that who can’t qualify and are willing to do these.”

Macleod MP Ted Menzies said the government is trying to protect homeowners and prospective buyers with the new rules and prevent a housing bubble from forming in the Canadian real estate market.

“There’s lot of debate going on out there whether or not we’re in a housing bubble and I’d argue we’re not, but we also don’t want to see one form,” said Menzies, who is also the parliamentary secretary to Minister Flaherty.

Menzies pointed out it was a housing bubble in the U.S. that caused the recession that has dragged on for more than a year and the government doesn’t want the same thing to happen in Canada.

He said the change is intended to protect Canadians in case interest rates rise in the future.

“We think it’s prudent considering where interest rates are,” said Menzies.  “They’re certainly the lowest I’ve seen in my lifetime. Chances are they could go up.”

He admitted the change could make it more difficult for first-time homebuyers, but said it shouldn’t keep them out of the market. He admitted they may have to save more to qualify for a mortgage.

By reducing the amount people can refinance their homes for, Menzies said it would protect them from ending up with a mortgage worth more than their home if prices drop.

“It doesn’t take an awful change in market value,” he said. “If you’ve just refinanced your house and took out a mortgage at 95 per cent of the value, we’re saying that’s probably a little risky.”

He said it will also help to protect the equity that people have built up in their homes over time.

He said the changes regarding government-backed mortgages are aimed at people who are buying properties with the intention of flipping them.

He said anyone speculating on the market to flip a house is essentially gambling on the market and shouldn’t be backed by taxpayer dollars.

“Canadian Mortgage and Housing Corporation uses taxpayers’ money to guarantee these,” Menzies said. “Government money shouldn’t be used to for someone who’s flipping mortgages… If you’re going to do that, use your own money.”

The new rules follow changes implemented in 2008, which included limiting the maximum amortization term for new government-backed mortgages to 35 years, requiring a minimum down payment of five per cent for new government-backed mortgages, requiring lenders to make a reasonable effort to verify borrowers can afford loan payments.

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