New mortgage rules attracting potential buyers after years of slow sales, brokers and realtors say

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The relaxation of Canada’s mortgage rules has the potential to be a game changer for the housing market, which has been mired in slow sales for about two years.

Realtors and mortgage brokers said they have been inundated with calls since the federal government unveiled two mortgage reforms on Monday that will make it easier for buyers to afford pricier homes.

“We were answering calls pretty consistently all day,” said Christine Cowern, founder and managing partner of the Christine Cowern Real Estate Team, who has sold homes in the Toronto area for 17 years. “Our clients’ feedback has been that anything to help them relieve monthly financial pressure is a great thing,” she said.

Under the new rules, buyers will be allowed to make a smaller down payment on homes up to $1.5-million instead of up to $1-million.

And first-time homebuyers will be allowed to stretch out their payments over 30 years instead of 25 years, which will reduce monthly mortgage payments. The new rules are to go into effect Dec. 15, ahead of the traditionally busy spring selling season.

By the numbers: How the new mortgage rules could change the math for homebuyers

Conrad Zurini, owner of Re/Max Escarpment Realty in the Hamilton region, said he fielded calls from more than a dozen clients with questions about how much they will save in monthly payments as well as about concerns the reforms will drive up home prices.

Mortgage insurance, which protects banks if a homeowner defaults on their mortgage payment, is currently not available if a home costs more than $1-million. The insurance is required if the down payment is less than 20 per cent of the purchase price, which means prospective buyers have had to have at least $200,000 for a down payment for a home that is priced at $1-million.

With the mortgage-insurance threshold set to rise to $1.5-million in mid-December, more people will be able to buy in the Vancouver and Toronto regions where the typical home price tops $1-million.

“Houses valued between $1-million and $1.5-million will see a surge in demand,” said James Laird, co-founder of mortgage brokerage and lender CanWise.

Mr. Zurini, who has sold homes in the Hamilton-Niagara region for three decades, said the higher insurable amount will allow buyers to compete just over the $1-million mark and perhaps offer $1,050,000.

Tuli Parubets, a mortgage agent with Mortgage Scout in Toronto, agreed the changes would help buyers compete for homes in that range. Ms. Parubets said she received about 17 calls from borrowers and realtors on the day the reforms were announced. She said her prospective homebuyers were excited about the changes and said one of her clients is now considering a townhouse with a garden instead of a relatively cheaper condo.

Royal LePage has said the higher insured value means buyers will have an easier time buying in more than a dozen cities where the median price of a detached home is between $1-million and $1.5-million. Those cities include Ajax, Brampton, Burlington and Milton in Ontario as well as Langley, Abbotsford, Kelowna and Victoria in B.C.

“It will make a dramatic difference in all our expensive markets,” said Neil Bosdet, a sales representative with Royal LePage Coast Capital Realty, who has sold homes in the Victoria region for a dozen years.

National housing market in ‘holding pattern’ as buyers patient for lower rates, CREA says

Home sales have been slow since the Bank of Canada started raising interest rates in early 2022. Although the central bank cut interest rates three times since June, activity remain slow as mortgage rates are still relatively expensive. The most recent national sales numbers in August continued to be below historical monthly averages.

Mr. Bosdet described the market as quiet and said the mortgage reforms along with the interest-rate cuts will help bring back first-time homebuyers.

He called the higher insurance cap a “really big” change and said the new measures “opens up so much more.”

First-time homebuyers accounted for 44 per cent of all the purchases with mortgages in Canada in the first quarter of this year compared with just over 50 per cent in 2014, according to data from the Bank of Canada.