on September 16, 2024 
In the first day of the fall session of parliament, Deputy Prime Minister Chrystia Freeland announced the Liberals are planning to make further changes to CMHC high ratio mortgage insurance, effective December 15th. First, they will increase the maximum purchase price allowed for insured purchases from $1 million to $1.5 million. Second, they will allow First Time Home Buyers to use 30 year amortizations on the purchase of any property (currently, these are only allowed on purchases of new construction) and allow any buyer to use a 30 year amortization on the purchase of a new construction property.
The first change will allow home buyers to purchase more expensive properties (up to $1.5 million) with a much smaller down payment. The current rules only allow insured mortgages on properties purchased for $1 million or less, which means any properties over that price require buyers to have at least 20% for their down payment. Exact details of how much down payment will be required under the new program are still to come, but it will likely be much less than 20% which will open up higher priced properties to buyers who have good income but are struggling to save up hundreds of thousands of dollars for down payments.
The change to the 30 year amortization rule will also expand property options for first time buyers. The increase from 25 to 30 year amortizations for first time buyers was just announced a few months ago, but it was limited to new construction properties only. Now, by expanding to all properties, the government is giving a significant advantage to first time buyers getting into the market to compete for properties in areas where there aren’t many suitable new construction options.
While both of these changes will make a big difference to some buyers who are positioned to act quickly, over the long term we are going to see home prices increase to the level where younger buyers are again priced out of the market. Why? Because both of these changes are going to increase the amount that buyers are able to pay, which increases the demand for housing. And when demand increases but supply stays the same, prices always rise to the new maximum amount that buyers are able to pay.
