Federal government raises cap on insured mortgages to $1.5-million

Finance Minister Chrystia Freeland announced two significant changes to federal mortgage policy Monday, raising the price cap for insured mortgages to $1.5-million, up from $1-million, and expanding eligibility for 30-year mortgage amortizations to all first-time homebuyers.

 

The government described the announcement as the most significant mortgage reforms in decades. Both changes are to be in place as of Dec. 15.

 

Raising the insurance threshold to $1.5-million will help first time homebuyers in Vancouver, Toronto and many parts of southern Ontario where the typical home price is more than $1-million.

 

Mortgage insurance is required in order to purchase a home with a down payment of less than 20 per cent.

 

Allowing all buyers to get a 30-year amortization may provide a boost for the new condo market, where sales have dropped to multi-year lows. Preconstruction condos used to be a popular investment for mom and pop investors and high-net-worth individuals, but they have fallen out of favour as the cost of purchasing the new condos have soared.

 

Ms. Freeland made the announcement at a news conference on Parliament Hill, where House of Commons sittings resumed for the first time since June. Concerns over housing affordability and the cost of living more broadly are top of mind for voters and all federal parties are attempting to position themselves as having a plan.

 

The federal government’s 2024 budget included a change that came into effect on Aug. 1, which allowed 30-year mortgage amortizations for first-time homebuyers purchasing new builds.

 

Monday’s announcement expands that provision to include all first-time homebuyers.

 

Currently the maximum amortization period for insured mortgages in Canada is 25 years.

 

“The government initially expanded eligibility to first-time home buyers purchasing new builds to incentivize the construction of new homes,” the Finance Department said in a backgrounder document explaining the change.

“Now, given inflation and interest rates have fallen, the government is expanding access to lower monthly mortgage payments to all first-time homebuyers and to all buyers of new builds,” the department said. “This will unlock the dream of homeownership for more first-time buyers, while also further incentivizing the construction of more new homes.”

 

The department said further details will be released in the coming weeks.

 

Under existing rules for insured mortgages, a minimum down payment of five per cent is required if the home costs $500,000 or less. If the home costs more than $500,000, the purchaser will need a minimum of five per cent down on the first $500,000 and 10 per cent on the remainder.

 

 

 

 

This article was first reported by The Globe and Mail