In December of 2024, the federal government softened its rules around mortgage lending. The idea behind the new policies is to make housing accessible to more homebuyers—and that’s what they’ll do, at least on paper.
The biggest changes affect buyers who have made down payments of less than 20 per cent, which require mortgage-default insurance. The government has lifted the maximum price cap permitted for these mortgages from $1 million to $1.5 million.
Another change is that first-time homebuyers with insured mortgages, and anyone buying a newly built home with one, will be able to take up to 30 years to pay off their loans, instead of the previous maximum of 25. That means smaller monthly payments, but it also means buyers will pay more interest over the life of their mortgages.
Apartment vacancy rates in many cities have hovered between one and two per cent for years, and severe supply shortages have pushed rents higher and higher, leading to historically expensive rents, even for mediocre units. If becoming a homeowner gets a bit easier, many people will jump at the opportunity—even if they have to stretch their finances to the limit.
In the end these rules will backfire, flooding the housing market with more buyers and driving prices even further out of reach. This will be most noticeable in our most expensive housing markets: big cities like Toronto and Vancouver, as well as smaller communities with insufficient supply, like Victoria.
In these markets, the new rules will jump-start demand for the same limited stock of homes. And it won’t just be renters trying to get on the housing ladder for the first time; we’ll also see existing homeowners, who wouldn’t previously have qualified for bigger mortgages, looking to upgrade their housing situation. That will especially increase demand for homes in the $1-million to $1.5-million range.
