Thirty-year mortgage amortizations for first-time buyers purchasing newly built homes in Canada will take effect on August 1, 2024. The federal government announced the new measure as a plan to bolster affordability and encourage the development of new housing. While the policy change is a step towards making housing more affordable, its impact and feasibility merit closer examination. 

Before August 1, 2024, the longest insured mortgage available is capped at 25 years. Mortgage insurance is required if your down payment on a home is less than 20%. The insurance is to protect your lender in the event of default. The new policy allows for a 30-year insured mortgage when purchasing a newly built home for less than one million dollars. In addition, CMHC has announced a 0.2 percent insurance premium hike for those taking advantage of the new policy. 

By restricting the program to new homes, the program will not provide the much-needed relief many aspiring homeowners require.  

Consider the practical implications for a prospective homeowner hoping to purchase a resale house priced at $850,000. With a 30-year mortgage, the buyer would pay approximately $400 less monthly than a 25-year mortgage. That is a sizable amount of money that could be allocated towards groceries and other household expenses or even provide for a bigger allowance in their home purchase. However, this benefit is limited to those purchasing a newly constructed property, which is only a portion of any market and does not align with every buyer’s needs or preferences. 

Canada needs a housing policy that considers equity and fairness across all markets. In larger metropolitan areas, this policy will be virtually limited to the condo market. It will do little to manage the demand for housing families as most condo units are too small to accommodate their needs. In less densely populated areas, this new measure will restrict consumer choices to a small number of developments that can take years to build and are typically away from well-established neighbourhoods with amenities already in place, such as schools, rec centres, daycares etc.  

The policy’s exclusion of resale homes creates a barrier to housing accessibility, particularly impacting those seeking affordable housing options. This disparity is further pronounced because newly constructed homes come with a higher price per square foot than resale homes. A more inclusive approach, encompassing all prospective home sales, would greatly contribute to levelling the playing field and making homeownership more achievable and equitable for consumers.   

The Cornerstone Association of Realtors supports the introduction of 30-year insured mortgages for first-time buyers of newly constructed homes as a means of facilitating entry into the housing market. However, the Association is concerned that the policy may unintentionally benefit developers over homebuyers by focusing solely on new builds and introducing additional premiums. To serve its objective, the policy should be broadened to encompass existing homes. This would ensure a wider range of housing options across all markets, helping even more Canadians striving to achieve the dream of homeownership.