Canada’s housing and mortgage markets are poised for a busy year ahead. With interest rate cuts expected to improve buyer confidence and recent mortgage rule changes on the horizon, 2025 could see a shift in affordability and accessibility for homebuyers. 
New Mortgage Rules: What you Need to Know
The federal government has introduced sweeping mortgage changes to ease the path to homeownership, calling it the ‘boldest reform in decades’. Here’s a breakdown:
- Increased Insured Mortgage Cap: The maximum price for insured mortgages has risen from $1 million to $1.5 million. This is great news for buyers in expensive markets like Toronto and Vancouver
- 5% down payment on the first $500,000
- 10% down payment on the portion between $500,000 and $1,5 million
For example: purchasing at $1.5 million home now requires a $125,000 minimum down payment – far less than the $300,000 required under uninsured mortgages.
- Expanded 30-year Amortizations: First-time homebuyers and new-build purchasers can now opt for 30-year amortizations on insured mortgages. This longer repayment period means lower monthly payments, making homeownership more manageable amidst high interest rates.
Eligibility criteria include:
- Not owning a home in the last four years
- Experiencing a marriage or common-law breakdown
Programs Supporting First-Time Buyers
These changes complement existing programs designed to help First-time buyers such as:
- First Home Savings Account (FHSA): Save up to $40,000 for your first home
- Home Buyers’ Plan(HBP): Tax-free RRSP withdrawals up to $60,000 per person
- First-Time Home Buyers’ Tax Credit: A $1,500 tax reduction to offset purchase costs.
- GST/HST New Housing Rebate: Refunds on new-build homes or major renovations
Market Trends: Multi-Generational Living and Rate Cuts
A growing trend expected to continue into 2025, is multi-generational living, where three or more generations live together. This arrangement allows families to pool resources and navigate affordability challenges.
Additionally, falling interest rates could stimulate the market, improving buyer sentiment and increasing housing activity throughout the year.
The Impact on the Housing Market
While the new insured mortgage cap benefits buyers in high-priced areas, concerns remain about overall affordability. For example, qualifying for a $1.5 million insured mortgage requires:
- A $125,000 Down Payment
- Annual income between $225,000 and $245,000
Furthermore, the expansion of 30-year amortizations may keep buyers in debt longer, increasing total interest costs.
Original article: www.canadianmortgageprofessionals.com
