Changes coming to Canadian mortgage rules
Previously, Canadians who do not pay at least a fifth of the cost of the house as a down payment need to take out mortgage insurance, but the insurance was available only for homes priced at $1 million or less. That limit is now $1.5 million.
On Monday, Finance Minister Chrystia Freeland unveiled adjustments to mortgage rules aimed at addressing housing affordability, a pressing political issue that has negatively impacted Prime Minister Justin Trudeau and his Liberal government.
Freeland announced that the government would raise the cap on insured mortgages from $1 million to $1.5 million, allowing more individuals to purchase homes with the required minimum down payment of five per cent.
Previously, Canadians who put down less than 20 per cent of a home's cost were required to obtain mortgage insurance, which was only available for homes priced at $1 million or less. That limit has now been increased to $1.5 million.
Freeland also shared that buyers will now be able to secure loans with a 30-year amortization period if they are first-time homebuyers or purchasing a newly built home. Previously, the 30-year option was only available to first-time buyers of newly constructed homes.
These changes, Freeland stated, are designed to "incentivize more new housing construction and tackle the housing shortage."
Trudeau's approval ratings have dropped to around 30 per cent in September, nearing a record low. Analysts and economists attribute much of this decline to the financial struggles faced by many Canadians, particularly due to high home and rent prices.
In Canada, most mortgages span 25 years, with interest rates resetting every three to five years. In contrast, U.S. homeowners can secure fixed rates for the entire duration of 15- or 30-year mortgages. The structure of Canadian mortgages exposes most borrowers to rising interest rates, contributing to the housing affordability crisis, which has been further strained by a record number of immigrants.
