Deputy Prime Minister and Minister of Finance Chrystia Freeland rises in the House of Commons on June 11, 2024 (Screen shot, ParlVU).
Finance Minister Chrystia Freeland has announced two major changes to the federal mortgage policy, increasing the cap on insured mortgages to $1.5 million from $1 million, and expanding eligibility criteria for 30-year mortgage amortizations to encompass first-time homebuyers.
Both changes are to be put in place as of Dec. 15, Freeland told reporters during a Sept. 16 press conference.
Raising the insurance threshold to $1.5 million aims to help first-time homebuyers in urban areas where home prices often exceed $1 million, Freeland said. Buyers will be able to qualify for an insured mortgage with a down payment of less than 20 percent.
The current price ceiling of $1 million on insured mortgages dates back to 2012, Freeland said.
“The Canadian economy and the market has changed a lot since then,” she said. “Canada’s nominal GDP has increased by 65 percent. It was time to look at that number, and that is a change that is going to have a real impact for thousands, even millions, of Canadians.”
The Liberal’s 2024 budget included a change that took effect Aug. 1, allowing 30-year mortgage amortizations for first-time homebuyers purchasing new builds. The Sept. 16 announcement builds on that plan.
Now, first-time home buyers or those purchasing newly constructed homes, including condos, will be able to take out loans for 30-year periods instead of the previous maximum of 25-year plans.
The change is a bid to reduce the cost of monthly mortgage payments and help more Canadians buy a home, Freeland said.
“This is really at heart a supply side measure,” she said. “This is about creating more demand for new builds, because we know that, crucially, Canada needs to get more homes built faster.”
Freeland’s announcement was made at a news conference on Parliament Hill to mark the first House of Commons sitting since June.
According to recent polls, voters are increasingly focused on issues related to housing affordability and the overall cost of living.
The newly-announced measures are part of the federal government’s plan to build nearly 4 million new homes, the government said in a press release.
The Liberals said they plan to bring forward regulatory amendments to implement the proposals and will announce further details in the coming weeks.
A minimum down payment of 5 percent is mandated for homes priced at $500,000 or less, according to the regulations currently governing insured mortgages. For example a $400,000 home would require a minimum down payment of $20,000.
For homes priced above $500,000, buyers are required to provide at least 5 percent as a down payment and a 10 percent down payment on the remaining balance.