Ottawa has announced two measures that will ease mortgage rules to help buyers afford pricier homes.
Changes will soon be coming to Canadian mortgage rules that the federal government hopes will make it easier for potential Home Buyers to get into the housing market and make housing more affordable.
We've been experiencing the softest real estate market since 2001. Not only are there fewer sales, this is the first time, since 2001, that there are more homes listed than there is buyer demand.
The new rules mean potential Buyers will no longer need a 20% down payment to buy homes with a purchase price of between $1 million and $1.5 million. Previous rules required Buyers putting less than 20% down, to acquire mortgage insurance (through CMHC, Canadian Mortgage & Housing Corporation). That insurance was only available for homes priced at $1 million or less. As of December 15, the price cap for insured mortgages (with less than a 20% down payment) will be $1.5 million, up from $1 million.
Also, ALL first time Home Buyers will now be eligible for 30-year mortgage amortizations, not just first time Buyers purchasing new construction. I've been waiting for this change for a long time as I believe the federal government should have done it from the get go.
Personally, the announcement is already attracting prospective Buyers back into the market. My Mortgage Brokers tell me that they've been inundated with Buyers' calls asking how much they could save in monthly payments. Home sales have been slow since interest rates started rising in 2022. Although the central bank has cut interest rates 3 times since June, Buyer activity hasn't increased...yet.
The new mortgage rules will ease down payment and cash flow hurdles – but there is a catch. The 30 year amortization change could help Hom Buyers access lower mortgage rates with smaller payments but they could be taking on more debt and pay more interest than with a 25 year amortization.
One solution, my Buyers are working with, is taking on a variable mortgage, now, and being able to switch to a fixed 5 year mortgage after further (anticipated) interest rate decreases.
I'm always here to answer any questions - none are too small or too large!
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