Move seeks to improve housing affordability
Canada is set to implement changes in its mortgage regulations that may provide a lifeline for first-time homebuyers. The Canadian government has allowed 30-year amortization periods for insured mortgages for individuals stepping into the realm of homeownership for the first time, particularly those eyeing newly constructed residences.
Finance Minister Chrystia Freeland unveiled the decision on Thursday, marking August 1st as the commencement date for the implementation of this policy shift. By extending the amortization period from the conventional 25 years to an extended 30-year timeframe, the government aims to offer a more flexible and manageable payment structure for aspiring homeowners to improve the affordability in the housing market.
According to BNN Bloomberg, the impetus for this strategic maneuver stems from an advocacy effort by the Canadian Home Builders’ Association (CHBA), which has long championed the extension of amortization periods. Advocates argue that elongating the amortization period by an additional five years holds the potential to alleviate financial strain, fostering a conducive environment for increased construction activities and bolstering accessibility to homeownership, particularly among the younger demographic segment.
“Faced with a shortage of housing options and increasingly high rent and home prices, younger Canadians understandably feel like the deck is stacked against them,” Freeland said in a news release.
“By extending amortization, monthly mortgage payments will be more affordable for young Canadians who want that first home of their own.”
In tandem with the extension of mortgage terms, the government has also announced an enhancement in the accessibility of funds for first-time homebuyers. Effective April 16th, the ceiling for withdrawals from Registered Retirement Savings Plans (RRSPs) is set to soar from $35,000 to a threshold of $60,000. Moreover, the government has extended a reprieve to individuals making withdrawals from RRSPs between January 1, 2022, and December 31, 2025. Previously constrained by a two-year repayment timeline, beneficiaries of this initiative now have an extended repayment period of up to five years in total.
