Three Key Policy Changes Shake Up Canada’s Housing and Mortgage Markets

Is Canada’s new plan to change mortgage rules going to help the housing market? This week, Finance Minister Chrystia Freeland announced some big changes. The government is making people buying homes easier by tweaking mortgage rules. 

But while these changes sound great on paper, experts warn they could worsen things. Let’s look closer at what’s happening, why some are cheering, and why others think it’s risky.

What Are the New Changes?

The government is changing three major things about mortgages. First, they’ve raised the cap on insured mortgages from $1 million to $1.5 million. What does that mean? Buyers can now get insurance on more expensive homes with a smaller down payment. Before, if your home costs more than $1 million, you must put down at least 20 percent to avoid buying mortgage insurance. Now, you can buy a pricier home with less money upfront.

Second, they’ve expanded the number of people who can get a 30-year mortgage. Until now, 30-year mortgages were only available to first-time buyers purchasing new builds. But now, any first-time homebuyer and anyone buying a newly built home can get a 30-year mortgage. This change lowers monthly payments, which can help people afford homes more easily.

Lastly, the government hopes these new rules will boost construction. Freeland said these policies should encourage developers to build more homes because more people can buy them. But experts are worried that these changes could push prices even higher.

Who’s Really Going to Benefit?

The idea is to help first-time buyers and others struggling to enter the market. The government hopes more people can afford a home by increasing the cap and offering longer mortgages. Penelope Graham, a mortgage expert from RateHub.ca, thinks these changes will make it easier for first-time buyers to get their foot in the door finally. Lower monthly payments might give buyers the chance they’ve been waiting for.

But there’s another side to this. Marc Desormaux, an economist at Desjardins, says these changes might only help a small group of buyers. He worries that making it easier to buy could actually drive up demand. More demand means higher prices. So while some people might be able to buy now, overall affordability could get worse. In the end, these rules might help a few but hurt many.

Will Prices Go Up Even More?

One big fear is that these changes could end up backfiring. Toronto realtor John Pasalis called the new policies a “quick fix” that only benefits some younger buyers right now. He argues that making it easier to buy homes without fixing the deeper problems will just make prices rise. The market doesn’t just need more buyers—it needs more homes.

And that’s where things get tricky. Canada’s housing market isn’t just struggling because people can’t afford homes. There’s also a shortage of skilled workers in construction, and building costs are high. Even if more people want to buy, it doesn’t mean there will be enough homes to meet that demand. So while the government is hoping these changes will lead to more construction, there’s no guarantee builders can keep up.

What About First-Time Buyers?

First-time buyers are supposed to be the biggest winners here. With 30-year loans and higher caps on insured mortgages, buying a home seems more doable. But there’s a catch. Unlike in the U.S., where 30-year fixed rates are standard, Canadian mortgages usually reset every few years. That means buyers can face higher payments if rates go up.

This is especially risky for first-time buyers who are already stretching their budgets. If interest rates spike, many could find themselves in financial trouble. The new rules might make buying easier now, but they don’t protect buyers from future rate hikes. So while the changes could help some, they might also set people up for problems down the road.

Does This Solve the Housing Crisis?

Even with these new rules, many experts say it’s not enough to fix Canada’s housing crisis. The real issue is that there aren’t enough affordable homes. Changing mortgage terms doesn’t add more houses to the market. Desormaux pointed out that without more construction, making it easier to buy only pushes prices higher.

The market needs long-term solutions. That means tackling the things holding back construction, like labor shortages and high building costs. Pasalis argues that the crisis won’t be solved with quick policy tweaks. What Canada really needs is a bigger plan to boost supply, not just more buyers.

A Step Forward or a Risky Move?

Canada’s new mortgage rules are a bold attempt to help more people buy homes. By raising the cap on insured mortgages and extending 30-year loans, the government wants to make homeownership more reachable. But without addressing the lack of affordable housing, these changes could end up doing more harm than good.

The big question is: Will these changes actually help the market, or will they just push prices higher? As Canada continues to deal with its housing crisis, it’s clear that deeper, more comprehensive solutions are needed. More construction, better support for builders, and careful management of demand are essential if Canada hopes to make housing truly affordable.