Welcome to the latest episode of Make Money Count! The Canadian housing market has seen significant changes recently, with the Minister of Finance introducing new policies that could impact your ability to purchase a home. In this episode, we break down the latest updates and what they mean for first-time home buyers, property investors, and the housing market as a whole.

Increased Insurable Purchase Price Limit

One of the biggest updates is the rise in the maximum allowable insurable purchase price from $1 million to $1.5 million. This means buyers can now purchase homes valued up to $1.5 million with less than a 20% down payment, thanks to CMHC insurance. Originally, lobbying efforts pushed for a $1.25 million limit, but the government exceeded expectations, aiming to make homeownership more accessible for Canadians. While this change might help buyers in pricier markets, it could also drive up demand, further pushing home prices higher.

30-Year Amortizations for First-Time Buyers and New Builds

In another bid to make housing more affordable, 30-year amortizations are now available to first-time home buyers and those purchasing newly built properties. This move could reduce monthly mortgage payments by around $300 on average, but it comes with a catch—home buyers will end up paying 24% more in interest over the life of the mortgage. This extended amortization period mirrors policies seen in other G7 countries, like Switzerland, where amortizations have been lengthened to stimulate the housing market. However, while this may ease monthly payments, it enriches the banks and doesn’t address the core issue—high interest rates.

Potential Impacts on Interest Rates and Housing Market Activity

These changes come as the Bank of Canada continues its efforts to control inflation and stabilize the housing market by maintaining high interest rates. There is speculation that these new policies could influence the timing of future rate cuts. Previously, a 50-basis point cut was predicted for late 2024, but now smaller reductions, 25 basis points in both October and December are expected, depending on how these adjustments impact housing market activity. The key question is whether these measures will bring enough buyers off the sidelines to jumpstart the housing market. 

Short-Term Gains, Long-Term Challenges

The government’s new policies might offer short-term relief for some home buyers, but they are unlikely to solve the deeper issues within Canada’s housing market. Without a substantial reduction in interest rates, buyer sentiment will likely remain cautious. For landlords, the added challenge of new tenant protections could further complicate an already delicate rental market.

As always, Cannect is here to help guide you through these changes and provide expert advice on how to navigate the real estate and mortgage landscape. If you have any questions, feel free to reach out, and don’t forget to like and subscribe to our content for regular updates.