OTTAWA (Askume) – Canadian Finance Minister Chrystia Freeland announced changes to some mortgage rules on Monday to improve housing affordability, a move that risks antagonizing Prime Minister Justin Trudeau and is a major political issue for its Liberal government.
Freeland said the government was raising the limit on insured mortgages to C$1.5 million ($1.1 million) from the previous C$1 million, allowing more people to buy homes with a minimum 5% down payment.
Previously, Canadians who did not put down at least a fifth of the cost of their home as a down payment were required to buy mortgage insurance, but the insurance only applied to homes costing C$1 million or less. The limit is now C$1.5 million.
In addition, Freeland said buyers will be able to get a 30-year loan if they are first-time buyers or buying a newly constructed home. Previously, the three-year amortization period was limited to first-time buyers buying newly constructed homes.
Freeland said in a statement that the measures would “encourage more new housing construction and address the housing shortage.”
In September, Trudeau’s poll approval rating fell to an all-time low of around 30 per cent, which analysts and economists said was mainly due to millions of people struggling with high housing prices, particularly home prices and rents.
In Canada, mortgage terms are typically 25 years, and interest rates reset every three to five years. In the United States, homeowners can enjoy a fixed interest rate for the entire term of a 15- or 30-year mortgage.
The structure of Canadian mortgages puts most borrowers at risk of rising interest rates and contributes to a housing affordability crisis exacerbated by a record influx of immigrants.
(1 USD = 1.3593 Canadian Dollars)
