New Mortgage Policies Aim to Enhance Homeownership Affordability

The federal government has unveiled a series of mortgage reforms designed to make homeownership more attainable for Canadians. Here are the key aspects of the new policies:

Longer Amortization for New Homebuyers

Policy Change:
  • Effective Date: August 1
  • Details: First-time homebuyers will now have the option of 30-year amortization periods on insured mortgages for newly constructed homes.
  • Current Limit: 25 years for buyers with down payments under 20%.
Objective: To lower monthly mortgage payments and make homeownership more affordable, especially for younger Canadians facing high rents and escalating home prices.
Quote: Finance Minister Chrystia Freeland: "Extending the amortization period will make monthly payments more manageable for young Canadians aspiring to own their first home."

Support and Suggestions: Lauren van den Berg, CEO of Mortgage Professionals Canada: Praises the move as a significant step toward leveling the playing field for first-time buyers but advocates for extending the benefit to all homebuyers to address regional housing disparities.

Concerns and Criticisms
Expert Opinions: Victor Tran, Mortgage and Real Estate Specialist at Ratesdotca: Points out that insured mortgages for new builds are relatively rare and many properties in high-demand areas like Vancouver and Toronto exceed $1 million, necessitating uninsured mortgages.

Impact on Housing Supply and Affordability

Kevin Lee, CEO of the Canadian Home Builders’ Association: Description: Calls the policy a "game changer."
Potential Benefits: Believes it could enhance affordability and stimulate new construction, aligning with the government’s goal of building 5.8 million homes over the next decade. Additionally, it might help the rental market as some renters transition to homeownership, freeing up rental units.

Additional Support for First-Time Homebuyers

Increased RRSP Withdrawals:
  • New Limit: $60,000 (up from $35,000)
  • Effective Date: April 16
  • Additional Change: Extending the repayment period for withdrawals from two years to five years for those made between January 1, 2022, and December 31, 2025.

First Home Savings Account (FHSA)

Program Details:
  • Savings Cap: Up to $40,000 over 15 years
  • Annual Contribution Limit: $8,000
  • Participation: Over 750,000 Canadians have opened an FHSA.

Permanent Amortization Relief for Existing Homeowners

Amendments to the Canadian Mortgage Charter:
  • Requirement: Financial institutions must offer permanent amortization relief for eligible homeowners.
  • Benefit: Allows homeowners to adjust monthly mortgage payments to more affordable levels indefinitely, providing crucial support amid economic uncertainties.

These comprehensive reforms demonstrate the federal government’s commitment to addressing housing affordability and supporting homeownership across Canada. While challenges remain, these policies are expected to provide significant relief to first-time homebuyers and existing homeowners, particularly in high-demand regions like Vancouver and Toronto.