The Government of Canada recently announced reforms to mortgage rules in the country which allow first-time homebuyers and all of those purchasing newly constructed homes, to take on 30-year amortization mortgages. Notably, the changes also increase the insurable home price limit from $1-million to $1.5-million.
“As a result, we expect the decline in outstanding insured mortgages to start to slow down and reverse, which is a positive development for private mortgage insurers,” say authors of a recent DBRS Morningstar note, Canada’s New Mortgage Rules: A Positive Development for Mortgage Insurers. “In our view, some risks exist, but we believe them to be well-managed.”
The new measures, effective December 15, 2024, they say will moderately increase demand for mortgage insurance. “This will help bolster the market, which has been on a decline for more than a decade, except for a temporary uptick at the start of the coronavirus pandemic.”
The note goes on to say DBRS Morningstar estimates that a threefold or fourfold increase in the number of homebuyers who will have 30-year amortizations available to them – up from about 10 per cent of borrowers who were previously eligible. “We expect additional new homeowners to be drawn into the housing market,” they write. They add that the firm expects to see the most uptake of insured mortgages on properties approaching the new $1.5-million cap. “Mortgage insurers have previously seen the distribution of their mortgages skewed toward smaller communities and condominiums in Toronto and Vancouver. Going forward, once the new measures take effect in December, we expect to see a closer alignment with broader national housing distribution.”
