A contractor works on a laneway home in east Toronto on Oct. 6, 2023. (Evan Mitsui/CBC)


September 17, 2024 Tags:

On Monday, Finance Minister Chrystia Freeland announced changes to mortgage rules in an effort to address housing affordability. However, some experts are skeptical that these measures will have a lasting impact and worry they could even drive up housing prices.

Starting December 15, the federal government will raise the cap on insured mortgages from $1 million to $1.5 million. This change will enable more buyers to secure a home with less than a 20% down payment. Previously, Canadians who put down less than a fifth of the home’s cost were required to obtain mortgage insurance, but this was only available for homes priced at $1 million or less. The new cap will allow coverage for homes priced up to $1.5 million.

Additionally, Freeland announced that homebuyers, including first-time buyers and those purchasing newly built homes, will now have the option of 30-year mortgages. Until now, this extended amortization period was only available to first-time buyers purchasing new builds.

Freeland stated that these measures would help boost new housing construction and address the current housing shortage.

The response to these changes has been mixed. Penelope Graham, a mortgage expert at RateHub.ca, acknowledged that the expanded mortgage insurance cap and longer amortization period would make it easier for first-time buyers to enter the market. However, she pointed out that it remains uncertain how this will improve affordability for homeowners renewing their mortgages.

Marc Desormaux, an economist at Desjardins, expressed concern that while the changes could help some buyers, they could also increase demand, putting more pressure on housing prices and making affordability worse in the long run.

Some home building groups have been advocating for longer amortization periods, arguing that a larger pool of buyers would encourage developers to build more homes. However, Desormaux noted that other challenges, such as a lack of skilled labor and high construction costs, are also hindering homebuilding efforts.

Toronto realtor John Pasalis criticized the new policy, calling it a short-term fix aimed at boosting home sales rather than addressing the root causes of the housing crisis. He argued that long-term solutions are needed to truly resolve the issue.

Prime Minister Justin Trudeau has faced declining approval ratings, with many Canadians struggling with rising home and rent prices, which have contributed to his recent political challenges.

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