Ottawa, September 2024 – In a significant move to address housing affordability, the Canadian government has announced that the price cap for insured mortgages will increase from $1 million to $1.5 million, effective December 15, 2024. This bold change is set to make homeownership more accessible for Canadians, particularly in high-cost urban areas.

Starting December 15, more Canadians will qualify for insured mortgages with a down payment of less than 20%, thanks to the increased price cap. This adjustment is especially beneficial for prospective buyers in cities like Toronto and Vancouver, where property prices often exceed the previous $1 million threshold. With this reform, potential homeowners will have greater purchasing power, allowing them to consider a wider range of properties, including those previously out of reach.

Anticipated Impacts

Experts predict that raising the price cap will stimulate the housing market by encouraging more people to buy homes, which could lead to increased construction and a boost in housing inventory over time. This change aims to address the high demand for housing and provide more opportunities for first-time homebuyers.

Important Considerations

Several factors remain crucial as this reform takes effect:

1. Mortgage Stress Test: Buyers must still pass the mortgage stress test to ensure they can afford their payments even if interest rates rise. This requirement helps maintain financial stability and protect borrowers.
2. Regional Variations: The impact of this reform will likely vary by region. In high-demand urban areas, the change could significantly boost market activity, while in less competitive markets, the effects might be more modest.
3. Economic Conditions: Broader economic factors, such as interest rates and employment levels, will play a role in the reform’s success. A stable economic environment with low-interest rates will likely amplify its positive effects.

As a mortgage broker, I believe this increase in the insured mortgage price cap is a welcome change. It reflects the realities of the current housing market and offers a much-needed boost to first-time homebuyers who have been struggling to enter the market. The expanded price cap should make it easier for buyers to find homes within their reach, fostering a more inclusive and dynamic housing market. However, buyers should remain mindful of the mortgage stress test and economic conditions to ensure long-term financial stability.

By increasing the price cap for insured mortgages, the government aims to make homeownership a viable option for a broader segment of Canadians, fostering a more inclusive and equitable housing market.

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Author: Suzie Han