Expert says higher mortgage caps and expanded amortizations will make homeownership easier
Canada has unveiled some of its most borrower-friendly mortgage policy changes in years, offering a much-needed lifeline to first-time buyers struggling to enter the housing market.
The reforms, including raising the insured mortgage cap to $1.5 million and extending 30-year amortizations, aim to ease financial pressure on young buyers and make homeownership more accessible amid high home prices and rising interest rates.
Ratehub.ca called these changes the “most accommodating mortgage policy updates” since 2008, predicting they will significantly reduce the financial strain for new buyers trying to break into the market.
“Boldest mortgage reforms”
The updated rules, which the government dubbed as their “boldest mortgage reforms in decades,“ is part of Canada’s housing plan to build 4 million new homes.
“These are the most accommodating mortgage policy changes seen since 2008, when high-ratio mortgages were briefly allowed to be amortized up to 40 years,” said Ratehub.ca mortgage expert Penelope Graham. “However, given how stagnant home sales have been in recent months following the Bank of Canada’s hiking cycle, it’s clear today’s borrowers need a bigger boost in order to enter the housing market.”
One of the major changes is raising the price cap for insured mortgages from $1 million to $1.5 million. This allows buyers with down payments of less than 20% to access mortgage loan insurance, which can cover up to 95% of a home’s purchase price.
For many first-time buyers, this means being able to afford a home that was previously out of reach due to high prices, especially in major cities like Toronto and Vancouver.
In its press release, the government said the current $1 million cap, set back in 2012 when home prices were lower, no longer reflects the reality of today's market. By raising this limit, more buyers will be able to purchase homes with a smaller down payment while still benefiting from the lower interest rates associated with insured mortgages.
Expanded 30-year amortization
Another crucial reform is expanding 30-year amortizations to all first-time buyers and new builds. Currently, most insured mortgages in Canada are limited to a 25-year amortization.
The longer amortization period will spread out payments, making monthly mortgage costs more manageable, which is particularly important for young buyers just starting their careers.
Graham sees this as a game-changer.
“Expanding this measure to all housing types, as well as allowing up to $1.5 million for insured mortgages, will greatly improve first-time home buyers’ access to the housing market, and for housing types beyond the traditional starter-home condo, as buyers can now buy more expensive home types with smaller down payments,” she said.
Graham noted that this policy helps lower monthly payments and improves the chances of passing Canada’s strict mortgage stress test, particularly in markets where homes regularly exceed $1 million. The longer amortization also gives buyers more flexibility to manage their payments as they work to increase their income.
“While it’s unclear how these new policies will impact the many Canadian borrowers who are coming up for their mortgage renewal, they will help greatly ease the financial burden for buyers breaking into the market for the first time,” she said.
“Combined with anticipated interest rate cuts in the coming months, these measures could ease Canadian housing affordability to levels not seen in many years.”
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