December is looking like a big month for the Real Estate industry. As the upcoming changes to a variety of policies are three weeks away, the questions are:

• Will the changes finally make home ownership more affordable?
• What do these changes mean for the average buyer?
• Is this going to open the middle sector and increase the ability for many to “move up”?
• Are the policy changes too little, too late?
• Will the changes backfire and create an over-stimulated Real Estate market?

To answer these questions fully with stats and evidence will take some time unfortunately, but the information below begins to build a framework for answering those questions and providing insight to the potential impacts of these changes.

Interest Rates

Significant changes are unfolding in the Real Estate world which could have large impacts for the Canadian real estate market. As of October 23 rd, 2024, the Bank of Canada has already reduced the overnight interest rate this year alone by 1.25% with many economists anticipating further reductions by the end of 2025.

The Bank of Canada’s final interest rate announcement is scheduled for December 11, 2024. This announcement will come just days before the new rules for mortgages takes effect.

Mortgage Rule Changes

Earlier this fall, the federal government announced two significant changes to mortgage lending, which will take effect December 15, 2024.

Increasing the Insured Mortgage Cap

The first of these changes is the increase to the price cap on insured mortgages from $1 million to $1.5 million. This change allows more Canadians to qualify for a mortgage with a down payment of less than 20%, while expanding access to cost savings and security of mortgage loan insurance.

This new price cap drastically changes down payment requirements. Currently, a buyer looking to purchase a $1 million property would need a down payment of just under $200,000, while a buyer looking at a $999,900 property would need $74,990. With the new rules, that $1 million buyer would need $75,000, saving them $125,000 in up-front cash.

Expanding 30-Year Amortizations

The second change is to the 30-year amortization rules. Prior to August 1st this year, home buyers needed to have a 20% down payment to be eligible for that length of amortization. On August 1st the Federal Government announced changes to allow for first-time home buyers buying new construction property to also be eligible. This adjustment was aimed at easing the cost of home ownership and jump-starting first-time buyers in the market. On September 16th , the government adjusted this policy to allow all first-time buyers, regardless of the property (new or resale), to qualify for a 30-year amortization. This change will help all first-time buyers by lowering their mortgage payments. Additionally, it was announced that the program was going to apply to any
buyer who was purchasing a new construction home.

Impacts

These changes have been met with mixed reviews. Some embrace the fact that the government is trying to implement policy that will reduce the monetary burden for those trying to purchase homes. However, critics are concerned about increased debt burdens and consumers having overall less equity in their property, while paying more interest over the lifetime of home ownership. Critics also worry that these changes, coupled with decreased interest rates, may overstimulate the housing market, resulting in soaring prices. With changing policies and lending reforms, you won’t please everyone. However, I think we can all agree that action is far better than inaction. Whether you agree with the policy changes or not, the facts speak for themselves; December 2024 is going to have an impact on the real estate market. With predictions of another rate decrease before year-end, and the introduction of policy designed to create more opportunity for buyers to purchase property, the market looks as if it will be heating up come 2025.

If you are currently looking to purchase a home or thinking of purchasing in 2025, these changes may change the strategy you use. Don’t wait to see how the market reacts – it’s time to take advantage of today’s insights. Set up a time to start planning your customized buying strategy with one of our experienced real estate professionals. Click here to get started.

Written By Travis Mountenay