What in fact is happening there is that if your down payment is less than 20%, the rules dictate that it must be insured. A mortgage loan which is insured is, of course, a lower risk to the financial institution, so generally it's possible—it's not necessarily the case—that you'd have a lower rate of interest on that.
However, the borrower must pay for the insurance—it's not zero cost, it's actually quite a significant cost—which is rolled into the upfront value of their mortgage, so they are paying for it in a different way. Those folks who have more than a 20% down payment then go to an uninsured mortgage. It's possible that their interest rate will be a few tenths higher, but they're not paying for the insurance, which is a pretty big upfront cost.
I think, in that sense, there's no perverse thing in the space around the decision, and it's a stretch to create a case where you're actually better off in the first case.