They say good things happen in 3’s. That idea works for the trio of mortgage rule changes that recently dropped out of the ‘housing industry’ sky.
First, the federal government introduced two major changes aimed at helping more home buyers get their foot in the real estate door. These rules start on December 15, 2024:
- The home-price cap for insured mortgages (requiring less than 20% down payment) is increasing from $1M to $1.5M — opening more access to primary and secondary home purchases in expensive markets.
- First-timers and new-build buyers can extend their insured mortgages from the standard 25 years to 30 years — helping them qualify for more ‘home’ or lower their mortgage payments.
Then, one more big rule change came from the federal banking regulator OSFI (Office of the Superintendent of Financial Institutions), which takes effect on November 21, 2024:
- At renewal time, homeowners with uninsured mortgages (20% down payment or more) don’t have to face the federal stress test when switching lenders for a better deal. (Insured mortgages already have a pass.)
Make no mistake — these changes are a big deal
The mortgage industry has been pushing for them for years. Interest rates and home prices have gone up, but some rules haven’t kept pace to help Canadians deal with the realities of today’s housing market.
Dan Eisner, True North Mortgage founder and CEO, is thrilled to finally see these changes come through. An industry disruptor, he knows full well the challenges home buyers and owners face with both higher interest rates and higher Canadian home prices.
“We’re seeing first-timers finally get some help to bid on a home closer to where they might work,” declares Dan. “Home buying will likely be more attainable, with mortgage payments that are more affordable.”
“And for those homeowners who are dreading a shift into higher rates at renewal,” Dan continues, “qualifying for a switch with just their contract rate might help them get to a better rate and save some mortgage cash.”
Could all these changes spur a home-buying frenzy and price increases?
With interest rates expected to drop further, some experts predict increased mortgage transactions as buyers rush to take advantage of the new rules.
Dan suggests that as much as 10% of his clients may opt to purchase sooner rather than later to benefit from these changes.
However, over the long term, he believes the adjustments will help normalize the housing market rather than spark a frenzy.
“The first-time and new-build buyer segments have been quieter recently,” Dan observes. “The insured mortgage rule changes, which aren’t for investors, should help them regain momentum to enter the market.”
Discouraging primary home purchases isn’t the answer
We’re all aware of our national housing shortage, which keeps Canadian home prices among the priciest in the G7 countries.
But, according to Dan, “Discouraging primary home purchases can upset the owner vs. investor balance even more to keep younger Canadians out of the market, which isn’t healthy for the sector in the long run.”
Housing starts are the real issue. “Governments are actively pursuing initiatives to increase construction to meet the demands of our growing population,” Dan offers. “Calgary and Edmonton are currently leading the way, and hopefully, despite building challenges, other centres can follow.”
Those challenges include construction labour shortages, government and city council red tape and taxes, higher interest rates, and inflationary effects on building supply costs, which interfere with a 'build, build, build' actuality nationwide.
What about the increased interest costs?
While the new insured mortgage rules offer benefits, some experts worry that higher mortgage balances and extended amortizations could lead to increased consumer defaults.
However, Dan remains optimistic, pointing to True North’s track record.
“Even with the rate hikes, our clients prioritize their mortgage payments,” he says. “Homeowners have great pride, and we see them being quite committed to reducing their balances and keeping up with their payments.
Dan suggests that once home ownership is achieved, amortizations and higher mortgage balances can be worked down as funds become available, reducing interest costs — even through a payment frequency adjustment (if your lender allows the change fee-free).
Bigger chances to buy, smaller rates to save
Whether you’re trying to get into your first home or are already there (staring down your next mortgage renewal), getting your best rate with flexible options can help make your mortgage more affordable.
True North’s expert brokers are also home buyers and owners, so they understand how simplifying your details, having flexible prepayment and payment frequency options, and passing along a volume discount can biggie-size your savings.
Give them a shout to see what they can do for your mortgage needs today.
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