The current government is likely to be in office until 2025, with an ambitious housing plan in the works
The talk of Ottawa over the past week has been the announcement of a deal between the Liberal Party and New Democratic Party (NDP) that will see the latter support the government on key parliamentary votes, a development that seemingly secures the current administration’s hold on power until the next scheduled election in 2025.
It’s an agreement that could have implications across a range of policy areas, with the NDP’s support contingent on federal government progress on key issues.
With the news likely to see Prime Minister Justin Trudeau and his government remain in office for the next three years, mortgage professionals are calling for action to improve housing market accessibility and help new buyers purchase a home.
A popular proposal among many agents and brokers in recent months has been an increase to the limit to qualify for Canada Mortgage and Housing Corporation (CMHC) insurance from $1 million to $1.25 million.
That’s a policy that was included in the Liberal Party’s manifesto ahead of the most recent federal election, and one that Tribe Financial Group CEO and co-founder Frances Hinojosa (pictured top) believes makes a lot of sense.
Hinojosa told Canadian Mortgage Professional that the move would reflect changing realities since that insurance was announced, with most detached homes in hot markets either approaching the million-dollar mark or already having surpassed it.
“Increasing that limit will not only allow more buyers to have a chance to get into the marketplace if they don’t quite have that 20% saved but can still afford to qualify for the mortgage,” she said, “but as well, it’s super important to give hope and potential to clients coming up for renewal.”
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Previously, customers who got an insurable mortgage before October 17, 2016, could qualify to be grandfathered, meaning they could still avail of a strong insurable rate even if their property value had subsequently risen above the $1 million limit.
However, the expiry of that exemption means a lot of consumers will be limited when it comes time for their mortgage renewal, Hinojosa added, with the cap on dollar limits introduced in 2012 having proved especially prohibitive. In that context, she said that possible government action in increasing the cap would be a welcome move.
The New Democrats have long called for the federal government to reinstate 30-year amortizations for insured mortgages for first-time homebuyers, another policy whose introduction seemingly becomes more likely with the new Liberal-NDP deal.
Hinojosa, a board member and regional director – Ontario at Mortgage Professionals Canada (MPC), which has also advocated for the measure, said it was an idea that could alleviate some of the burden on first-time buyers and help increase access to the market for new entrants.
“Most consumers, when they’re first-time homebuyers, make less than 20% down during that life stage where they really need the extra cash flow for childcare, paying off student debts – they’re just starting off their lives,” she said.
“[For] most people, when it’s their first home it’s not their forever home. So if they’re going to refinance or you’re going to purchase another property down the road – you may have 20% - I find that most individuals will re-extend that during amortization.”
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Extending that amortization would allow consumers to have better cash flow, Hinojosa said, which could then be used towards essential expenses, as well as injecting money into the Canadian economy.
Neither the Liberals nor NDP proposed amending the mortgage qualifying rate in their most recent election manifestos, with that rate for both insured and uninsured mortgages having changed as recently as June 2021.
That amendment saw the minimum stress test level set at 5.25%, or the contract rate plus 2%, whichever is higher, although Hinojosa noted that with current uninsurable rates hovering around 4%, clients are actually qualifying at closer to 6% at present.
While changes could be forthcoming on that rate, she said that addressing the first two issues – the cutoff for CMHC insurance and longer amortizations – would be the strongest imminent measures the government could introduce to improve conditions in Canada’s housing market.
“The greatest impact on the housing market for consumers would be increasing the insurability guidelines,” she said, “and allowing insured mortgages to go to the 30-year, to mirror what uninsurable mortgages are at currently.”
