Canada's new mortgage rules are here: Insights from brokers

Sweeping changes to Canada’s mortgage system, announced in September by the federal government, officially took effect on Sunday. Brokers said the changes could open the door for more Canadians to enter the housing market.

New mortgage rules explained
For the first time since 2012, the price cap for insured mortgages has been increased, rising from $1 million to $1.5 million. This allows buyers of homes valued above $1 million to qualify for smaller down payments. Previously, those purchasing homes over $1 million had to put down at least 20%, while homes under this threshold required only 5% down.

Additionally, first-time homebuyers and buyers of newly built homes with insured mortgages can now access 30-year amortizations, up from the previous 25-year limit. This extends a decision implemented on August 1, which made 30-year terms available for first-time buyers of new builds. These longer terms aim to make monthly payments more manageable for borrowers.

Homeowners with insured mortgages also have new options to refinance properties valued up to $2 million to build additional dwelling units, such as laneway homes, potentially contributing to housing density in urban areas.

What are the experts saying?

Mortgage broker Mary Sialtsis believes these changes will help more buyers enter the market.

“It’s going to open some new opportunities for buyers,” she told the Toronto Star.

The 30-year mortgage option, in particular, could increase affordability for those previously sidelined by the 25-year limit.

However, Sialtsis cautioned that longer amortization periods could lead to higher overall interest payments unless borrowers commit to strategies like bi-weekly payments or extra contributions.

The increased insured mortgage cap is particularly significant in urban areas like Toronto, where the median price of a single detached home is $1.23 million, according to Canadian Real Estate Board data for Q3 2024. For condo units, the median price stands at $615,250.

Mortgage broker Shawn Zigelstein said that the previous cap often limited offers to $999,999, as surpassing this amount required a much larger down payment. The updated limit could ease competition for homes below the $1 million mark.

“People had $50,000 put down. But if they went up another dollar, they suddenly needed $200,000 to put down,” he explained. The increased cap could ease competition for properties under $1 million.

However, not all are convinced the changes will improve housing affordability. John Pasalis, president of Realosophy, warned that the reforms could lead to short-term home price inflation.

“This is really just a short-term policy fix,” Pasalis said. “Allowing people to take on debt doesn’t improve affordability.”

The new refinancing options, allowing homeowners to fund additional dwelling units, aim to support the gradual increase of housing density. Though the measure may not affect a broad swath of borrowers, Sialtsis noted it could be valuable in addressing Canada’s housing supply issues.

CIBC economist Benjamin Tal suggested additional measures could be announced soon, as housing affordability remains a politically sensitive issue.

“The Liberal government is now panicking over housing because the Conservatives are owning the housing fight,” Tal said during a recent talk. He expects more changes to be announced in Finance Minister Chrystia Freeland’s Fall Economic Update on Monday.

“Everybody realizes that housing is the number one file and will be determining who is going to govern after the next election,” he added.

Source: Canadian Mortgage Professional