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The federal government today unveiled new measures aimed at improving access to housing for first-time buyers.
The announcement comes less than a week before the 2024 federal budget, as the government acknowledged the challenges young homebuyers face in saving a down payment for their purchase.
"Faced with a shortage of housing options and increasingly high rent and home prices, younger Canadians understandably feel like the deck is stacked against them. We are changing that," Minister of Finance and Deputy Prime Minister Chrystia Freeland said in a release. "What we are announcing today will make a downpayment much more attainable for younger Canadians."
The new measures consist of:
- Extension of maximum amortization period for insured mortgage on new builds:
- Effective August 1 of this year, the maximum amortization period for new-build properties will be extended to 30 years from the previous 25 years. This change applies specifically to default-insured mortgages, wherein the down payment is less than 20%.
- Increase in Home Buyers’ Plan limit:
- Starting April 16, 2024, the Home Buyers' Plan limit will be raised from $35,000 to $60,000. This program enables first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) tax-free, provided they are used for their first home purchase and are repaid within 15 years.
- Extension of repayment grace period:
- First-time homebuyers who withdraw from their Home Buyers’ Plan between January 1, 2022, and December 31, 2025, will enjoy an extended repayment grace period of up to five years, an increase from the current grace period of two years.
- Permanent amortization relief for existing homeowners:
- Amendments to the Canadian Mortgage Charter will provide permanent amortization relief for qualifying existing homeowners. While specific details are forthcoming, this relief will target "at-risk" homeowners who meet designated eligibility criteria.
The increased maximum amortization limit for insured mortgages on new builds is a partial reversal of policy that took place in 2012, when the maximum amortization period for insured mortgages was reduced from 30 years to 25 years.
This change was implemented by the federal government in response to concerns about rising household debt levels and the potential risks associated with longer mortgage terms.
But in allowing longer amortization for select mortgages, borrowers can benefit from lower monthly payments and improved cash flow, particularly in the face of today’s high-interest rate environment.
Prospective homebuyers who want to know more about how they might be impacted by these measures are encouraged to reach out to a mortgage broker, who can provide personalized guidance tailored to their specific financial situation and housing goals.
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