Affording a home is one of the biggest financial challenges for young people
The federal finance minister has announced changes to mortgage rules to address the homebuying challenges of young Canadians.
Chrystia Freeland announced on Monday that the government was building on the change that came into effect last month allowing 30-year insured mortgage amortizations for first-time buyers of new builds including condos.
The newly announced measures include all buyers of new builds and will come into effect from December 15, 2024.
Additionally, on the same date, the $1 million price cap for insured mortgages will be increased to $1.5 million, enabling more Canadians to meet the conditions to qualify for an insured mortgage with a 20% down payment. The insured mortgage cap has not been raised since 2012.
The 2024 budget also empowered all insured mortgage holders to switch lenders at renewal without being subject to another mortgage stress test.
“We have taken bold action to help more Canadians afford a downpayment, including with the Tax-Free First Home Savings Account, through which more than 750,000 Canadians have already started saving,” Freeland said. “Building on our action to help you afford a downpayment, we are now making the boldest mortgages reforms in decades to unlock homeownership for younger Canadians. We are increasing the insured mortgage cap to reflect home prices in more expensive cities, allowing homebuyers more time to pay off their mortgage, and helping homeowners switch lenders to find the lowest interest rate at renewal.”
BMO concern
However, BMO strategist Benjamin Reitzes highlighted unintended consequences resulting from a housing market rebound with interest rates at a higher level than would otherwise have been necessary.
“My bigger concern is that the market has calmed and behaved as well as policymakers could have hoped, and now we’re adding fuel,” he told BNN Bloomberg. “Canadian households have been responsibly de-leveraging driven by higher rates, and these changes will only incent increased debt burdens.”
