In a move praised by advocates, the federal government announced significant changes to mortgage rules aimed at making homeownership more affordable for Canadians. Speaking in Toronto, Finance Minister Chrystia Freeland revealed that starting August 1, the government will allow 30-year amortization periods on insured mortgages for first-time homebuyers purchasing newly built homes. This is a notable shift from the current maximum of 25 years for those with a down payment of less than 20% of the home price.
Extended Amortization Periods for First-Time Homebuyers
The extension of the amortization period is designed to make monthly mortgage payments more manageable, particularly for younger Canadians facing high rent and escalating home prices. Freeland highlighted the shortage of housing options and the financial pressures on younger generations, stating, “By extending amortization, monthly mortgage payments will be more affordable for young Canadians who want that first home of their own.”
Mortgage Professionals Canada CEO Lauren van den Berg welcomed the policy as a positive step, noting it would help level the playing field for first-time homebuyers. She emphasized that this change could foster greater opportunities for homeownership and contribute to economic revival and recovery. However, van den Berg also called for the expansion of this option to all Canadians, regardless of whether they are purchasing a new build or a pre-existing home, to address regional disparities in housing availability.
Challenges and Criticisms
Despite the positive reception, some experts have raised concerns about the policy’s effectiveness based on its eligibility criteria. Victor Tran, a mortgage and real estate specialist at Ratesdotca, pointed out that while insured mortgages are available for new builds, they are relatively rare. Additionally, many properties in high-demand areas like Vancouver and Toronto are priced above $1 million, necessitating uninsured mortgages.
Impact on Housing Supply and Affordability
Kevin Lee, CEO of the Canadian Home Builders’ Association, described the announcement as a “game changer.” He suggested that longer amortization periods could significantly enhance affordability and stimulate more construction. This measure aligns with the government’s ambitious goal of building 5.8 million new homes over the next decade. Lee also noted potential benefits for the rental market, as some renters may now transition to homeownership, freeing up rental units.
Additional Measures for First-Time Homebuyers
As part of the announcement, Freeland also stated that the government will increase the amount first-time homebuyers can withdraw from their RRSPs to purchase a home—from $35,000 to $60,000—effective April 16. This adjustment reflects the higher down payments and longer saving periods required in today’s housing market. The government is also extending the repayment period for these withdrawals from two years to five years for those who made withdrawals between January 1, 2022, and December 31, 2025.
First Home Savings Account
The changes complement the First Home Savings Account (FHSA) program launched last year. This program allows prospective homebuyers to save up to $40,000 over 15 years, with an annual deposit cap of $8,000. To date, more than 750,000 Canadians have opened an FHSA.
Permanent Amortization Relief for Homeowners
Ottawa also announced amendments to the Canadian Mortgage Charter, expecting financial institutions to offer permanent amortization relief for eligible homeowners. This would enable homeowners to adjust their monthly mortgage payments to more affordable levels for as long as necessary, providing crucial support amid fluctuating economic conditions.
Conclusion
These comprehensive measures represent the federal government’s effort to address housing affordability and support homeownership across Canada. While challenges remain, the policies are expected to offer significant relief to first-time homebuyers and existing homeowners, particularly in high-demand markets like Vancouver and Toronto.