NEWS UPDATE: Federal Government Raises Insured Mortgage Cap to $1.5M, Expands 30-year Amortizations

Additionally, the government said it is also expanding access to 30-year amortizations to all first-time homebuyers in order to help reduce monthly payments.

In April, the government announced it would allow 30-year amortization periods on insured mortgages but only for first-time homebuyers purchasing newly built homes.

“These measures are the most significant mortgage reforms in decades and part of the federal government’s plan to build nearly 4 million new homes—the most ambitious housing plan in Canadian history—to help more Canadians become homeowners,” the government said in its release.

Bruno Valko, VP of national sales for RMG, pointed out that allowing all first-time buyers to take advantage of longer amortizations periods could make a “meaningful difference” in affordability.

Based on the current average home price of $649,100 as of August, a 30-year amortization would offer roughly $300 per month in payment relief compared to a 25-year term based on current 5-year mortgage rates, Valko told CMT.

“I think that’s a significant amount that may encourage some and better qualify others to purchase their first home,” he said. “It’s good news.”

The reforms come amid growing concerns about affordability and access to housing in major cities. By raising the insured mortgage limit and extending amortization periods, the government aims to address the growing challenges faced by both first-time buyers and those seeking to upgrade their homes in increasingly competitive markets.

“Building on our action to help you afford a downpayment, we are now making the boldest mortgages reforms in decades to unlock homeownership for younger Canadians,” Deputy Prime Minister and Minister of Finance Chrystia Freeland said in a statement.

The government also released its Blueprints for a Renters’ Bill of Rights and a Home Buyers’ Bill of Rights, saying it is working with provinces and territories to implement these measures it says will protect Canadians from renovictions and blind bidding, and that will standard lease agreements and increase transparency by making sales price history available through title searches.

The changes will take effect in December 2024, with further details on the implementation and transition process to follow.

Mortgage industry reaction

Lauren van den Berg, CEO of Mortgage Professionals Canada (MPC), expressed strong support for the federal government’s reforms, calling the decision to increase the insured mortgage cap to $1.5 million a “huge win for Canadians.”

MPC had long been advocating for an increase to $1.25 million, indexed to inflation, so this announcement exceeded expectations.

“We’re also happy to see the expansion of 30-year amortizations to all first-time homebuyers and to all buyers of new builds, as well as the exemption of the stress test when switching lenders at renewal,” she said.

“This milestone, achieved through our persistent advocacy, shows that housing is now truly a top priority for the government and represents a significant win for first-time buyers and the housing market as a whole,” she added. “Our mission remains steadfast: to advocate for fair, transparent, and affordable housing market for everyone.”

Jill Moellering, an Edmonton-based mortgage planner at Mortgage Architects, also welcomed the changes, saying that they open the doors to homeownership for many who were previously priced out of their markets.

She pointed out that under the new rules after December 14, buyers will be able to purchase a $1.5-million home with a $125,000 down payment, compared to the current $300,000 requirement.

“That’s still a substantial amount to save up, but the ability to get into the market much quicker, for some, decades sooner,” she told CMT. “I already have clients I know who will benefit from this.”

Moellering added that the expansion of 30-year amortizations to all first-time buyers is another major step forward, though she would have preferred to see it extended to all insured mortgages for consistency.

However, she does expect the moves will bring a surge in demand and activity in the market. “Brokers should have their phones fully charged from here on out,” she said.

Debate stirs over long-term impact

While reaction has been largely positive, some in the industry expressed concerns about the timing and impact of the changes.

Ron Butler of Butler Mortgage said this appears to be a pre-election move by what he called a “desperate government,” comparing it to “providing a safe injection site for mortgage debt.”

He pointed out that getting a $1.4-million government-insured mortgage might still require both sets of parents to co-sign, highlighting that even with these reforms, affordability remains a major hurdle for many young buyers.

Mortgage broker Ryan Sims raised concerns about the potential risks of extending amortizations to 30 years for first-time buyers.

“Do we really need 30-year amortizations? We’ve tried this before, and it didn’t end well,” he cautioned in a message to subscribers. While it reduces monthly payments, Sims emphasized that it ultimately increases the total cost of homeownership.

He criticized the move as a “Band-Aid solution” to Canada’s housing affordability crisis, suggesting instead that removing or adjusting the mortgage stress test would be a more effective approach to easing entry into the market.

“Even removing the stress test under certain conditions would not fix housing, it would simply make qualifying easier,” he noted.