Look at me trying to use a North American sports metaphor!… let me know how I do!
The recent changes announced by the Canada Mortgage and Housing Corporation (CMHC) triggered the moment I knew for all the talk of ‘affordability’ coming from the Federal Government that they were looking to place a backstop under further price corrections across the country. They say these adjustments will address housing affordability and accessibility for homebuyers in Canada, which they will in some senses. What they’re not saying out loud though is that these measures also protect current house prices by increasing buyers’ purchasing power.
Here are three of the primary changes from the last few months:
- Increased Insured Mortgage Cap: The maximum price for insured mortgages has been raised from C$1 million to C$1.5 million. This adjustment enables more buyers to qualify for mortgage insurance with a minimum 5% down payment, facilitating access to higher-priced homes.
- Extended Amortization Periods: First-time homebuyers and purchasers of newly built homes can now opt for mortgages with 30-year amortization periods, up from the previous 25-year standard. This extension reduces monthly payments, making homeownership more attainable.
- First-Time Home Buyer Incentive (FTHBI) Program: The FTHBI offers eligible first-time buyers 5% of the purchase price for resale homes and up to 10% for newly constructed homes. In return, CMHC retains an equity stake in the property, sharing in any future gains or losses.
That might sound like a lot of jargon, so here’s the increased insurance mortgage cap looks like in dollars and cents:
| Home Cost | Minimum Down | 20% Down | Difference |
|---|---|---|---|
| $1,500,000 | $125,000 | $300,000 | +$175,000 |
| $1,400,000 | $115,000 | $280,000 | +$165,000 |
| $1,300,000 | $105,000 | $260,000 | +$155,000 |
| $1,200,000 | $95,000 | $240,000 | +$145,000 |
| $1,100,000 | $85,000 | $220,000 | +$135,000 |
| $1,000,000 | $75,000 | $200,000 | +$125,000 |
That’s a huge difference and it clearly opens up opportunities for buyers to stretch further in their pursuit of housing. By nature it also places a backstop behind any further price drops in the entry level single-family home market across the Lower Mainland.
The amortization period extensions increase ‘affordability’ from a monthly payment standpoint, but do remember that it does increase the amount of interest paid over time.
The FTHBI is an interesting program that we’ve not seen much uptake on yet but may well in the future.
Overall, these changes play into our overall sense that we’re likely at an interim low on prices again and we anticipate modest price appreciation throughout the Spring of 2025.
If you’d like to know how any of these changes impact you and your scenario, please reach out, we’ll be happy to discuss!