In a big move to address Canada’s ongoing housing crisis, the federal government has announced that the cap for insured mortgages through the Canada Mortgage and Housing Corporation (CMHC) will increase to $1.5 million. This decision aims to make homes more affordable for Canadians, even as house prices continue to rise. Along with this, the government is also reintroducing 30-year amortizations, giving homebuyers more time to repay their loans, which will lower their monthly payments.
Why This Matters
Until now, the CMHC only insured mortgages up to $1 million. However, as home prices have soared in major cities like Toronto and Vancouver, many Canadians were unable to find affordable housing within that limit. With the new cap of $1.5 million, more people may be able to secure a mortgage in these high-demand areas. For homeowners, this is great news as it could mean a bit more breathing room when buying a house.
But, this change also comes with concerns. Some experts argue that by increasing the mortgage limit, house prices may continue to rise, putting even more pressure on the market. This situation could make homes more expensive for those already struggling to afford them.
Housing Market Update: A Waiting Game
As the government makes these changes, buyers are playing a waiting game. According to the Canadian Real Estate Association (CREA), many potential buyers are patiently waiting for interest rates to drop before they dive back into the housing market. This has led to a “holding pattern” where fewer people are buying, and sellers are holding off on listing their properties until they see more activity .
The Housing Shortage Challenge
Meanwhile, housing starts—new homes being built—are not keeping pace with the growing demand. Ottawa has only met 22% of its target for housing starts in 2024 . This means that fewer new homes are being built, which adds more pressure on the already tight housing supply.
This shortage isn’t limited to just Ottawa. In Quebec, the housing crisis has worsened, especially since Moving Day earlier this year. Many families are still struggling to find affordable homes .
In British Columbia, seven communities were denied extensions to meet new housing laws . Without these extensions, it will be harder for these communities to catch up with housing demand.
Local Solutions: Summerside and Halifax
Some cities are finding creative ways to address the housing crisis. Summerside, a small community on Prince Edward Island, is keeping certain neighborhoods low-density, but it’s also using funds from the federal Housing Accelerator Program to build new homes in other areas .
In Halifax, landlords are defending the use of fixed-term leases, which some critics claim are a loophole around the rent cap. By using these leases, landlords can charge higher rents once the lease ends, making it tougher for renters to find affordable homes .
Mortgage Rates at Record Lows
For those looking to buy a home, there’s some good news. According to mortgage expert Robert McLister, national mortgage rates are at some of the lowest levels seen in recent years . If interest rates drop further, we may see a surge in buyers returning to the market.
Stable Real Estate Prices
Despite the challenges, real estate prices in August 2024 remained stable . This may provide a bit of relief for homebuyers who have been concerned about skyrocketing prices.
Conclusion
With the government raising the insured mortgage cap to $1.5 million and reintroducing 30-year amortizations, Canada’s housing market is experiencing some big changes. While these efforts aim to make housing more affordable, there are still significant challenges, such as low housing starts and regional housing shortages. As buyers await lower interest rates, the housing market remains in a bit of a holding pattern, but the hope is that these policy changes will help make a difference for those trying to enter the market.
References:
- Canadian Mortgage Trends, “Federal government raises insured mortgage cap to $1.5M, expands 30-year amortizations,” Canadian Mortgage Trends, September 2024. Link
- Canadian Mortgage Trends, “National housing market in ‘holding pattern’ as buyers patient for lower rates: CREA,” Canadian Mortgage Trends.
- CTV News, “Ottawa only at 22 per cent of target for housing starts in 2024,” CTV News.
- CBC News, “7 communities denied extensions to comply with B.C. housing laws,” CBC News.
- CBC News, “Summerside keeping some low-density neighbourhoods and its Housing Accelerator money,” CBC News.
- Global News, “Quebec’s housing crisis has worsened since moving day, group says,” Global News.
- Financial Post, “Robert McLister: These are the lowest national mortgage rates in Canada right now,” Financial Post.
- Newswire, “Housing starts for August 2024,” Newswire.
- Thorold Today, “Real estate prices stable in August,” Thorold Today.
- Guelph Today, “Rent cap loophole? Halifax-area landlords defend use of fixed-term leases,” Guelph Today.
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