On September 16, 2024, the Canadian government introduced groundbreaking mortgage reforms aimed at addressing housing affordability and accessibility. These changes, effective as of August 1, 2024, offer new opportunities and challenges for industry experts, reshaping how properties can be financed; real estate professionals need to be familiar with these changes, so they can advise clients properly. The new rules include major updates that are expected to have wide-reaching effects on the housing market.
Key Updates for Real Estate Professionals:
Introduction of 30-Year Amortizations for Insured Mortgages
One of the most significant reforms is the expansion of 30-year amortizations for insured mortgages, aimed at reducing monthly payments for borrowers. Starting December 15, 2024, first-time homebuyers will be able to access 30-year insured mortgages for both new builds and resale homes. Additionally, this change will apply to buyers of pre-construction homes, including investors, marking a key shift in accessibility for this segment. This builds on an earlier amendment, effective August 1, 2024, which introduced 30-year amortizations for first-time homebuyers purchasing new builds.
This longer term reduces monthly payments by roughly 9% compared to a 25-year mortgage, according to an Edge Realty special report, if all other factors are equal, making it more feasible for clients to enter high-cost markets. Real estate professionals can guide clients accordingly, and potentially present new opportunities for investor clients interested in such projects.
Insured Mortgage Cap Increased to $1.5 Million
With rising home prices in major markets like Toronto and Vancouver, the insured mortgage cap has been increased from $1 million to $1.5 million. For real estate professionals, this means more clients—particularly in high-value markets—can qualify for an insured mortgage with lower down payments. Now, buyers can put down 5% on the first $500,000 and 10% on the remaining portion, allowing for a $1.5 million home with a down payment of $125,000. This change helps professionals unlock more buying opportunities for clients previously priced out of insured mortgage options.
Switch Lenders Without Requalification
Another key change is the expansion of the ability to switch lenders without requalification under the stress test. Initially introduced in the 2024 Canadian Mortgage Charter in Budget 2024, this provision now covers pre-construction home buyers as well. This policy shift creates a competitive lending environment. Clients will have more flexibility in securing the best mortgage terms, whether for a first-time buyer or an investor looking to refinance a pre-construction property.
New Opportunities Real Estate Professionals Can Present
Opportunities for First-Time Homebuyers
These reforms provide real estate agents and mortgage brokers more tools to help first-time buyers overcome financial hurdles. The extended 30-year amortization and raised insured mortgage cap can make higher-value properties more accessible, especially for younger buyers in cities where affordability is a key concern.
Investor Opportunities
The ability for investors to secure 30-year insured mortgages for pre-construction homes opens new avenues for professionals targeting investment clients. Pre-construction condo sales have slowed due to rising costs, but this reform could renew interest in the segment, especially in rental-heavy markets. Advisors should be prepared to educate investors on the impacts of these changes, including advising on cash flow and returns, particularly in urban centers where demand for rentals is strong.
Increased Competition and Better Rates
With the added flexibility to switch lenders without stress test requalification, professionals should emphasize the importance of shopping for better mortgage terms at renewal. As competition among lenders potentially intensifies, clients may be able to secure more favourable rates.
Looking Forward
While these changes aim to increase homeownership and stimulate the housing supply, real estate professionals must remain vigilant about market responses.
As these reforms take effect, the long-term impact on the housing market remains uncertain. While the intent is to improve affordability, the increased purchasing power granted to buyers could potentially drive up home prices in certain markets, especially in the short term. Increased buyer access to higher-value homes may exert upward pressure on prices, especially in competitive markets. Additionally, there may be other unforeseen consequences that emerge as the market adjusts to these significant changes.
Understanding the nuances of these reforms will be essential for guiding both homeowners and investors through Canada’s evolving real estate landscape.
