The Liberal government’s latest efforts to make it easier for young Canadians to buy a home will also help address the housing supply crisis, Finance Minister Chrystia Freeland argued Tuesday.
The deputy prime minister spoke to reporters about last week’s announcement that Ottawa would make 30-year mortgage amortizations available for all new construction and all first-time buyers, as well as proposals to raise the price limit for insured mortgages to $1.5 million, up from the current $1 million. Both changes will take effect on Dec. 15.
These measures have been positioned as a way to make it easier for Canadians who are excluded from the property market to qualify for a mortgage and reduce the size of their monthly payments.
Freeland reiterated Tuesday that the Liberal government is seeking to provide additional support to young Canadians and those struggling with unaffordable housing amid still-high borrowing costs and home prices.
“It is absolutely essential that the dream of home ownership becomes a reality for young Canadians,” he said.
“We are intentionally giving them an advantage in the real estate market.”
But Freeland was also asked if she had considered whether Ottawa’s latest proposals to add more buyers to the mix would simply end up driving up home prices as competition for properties on the market intensifies.
Receive weekly financial news
Receive expert insights, Q&A on markets, housing, inflation, and personal finance information every Saturday.
He said the Liberal strategy was “carefully targeted” at first-time buyers, citing last year’s launch of the First Home Savings Account aimed at helping young Canadians save for a down payment.
Freeland added that the latest measures also focus on new construction, arguing that the measures will add an “extra incentive” to buy new homes and encourage builders to add more housing stock.
The Canadian Home Builders Association praised the government’s move last week, arguing that developers cannot begin building new properties if prospective buyers cannot qualify for mortgages.
Some experts who spoke to Global News last week said the only impact of the new proposals on housing construction would be indirect, as rising prices encourage investors to put money into existing construction.
The Liberal government aims to build 3.9 million additional homes by 2031. Freeland said they have been making progress toward that goal with a series of policies aimed at spurring home buying announced over the past year as housing affordability became a priority for Canadians.
Freeland said the Liberal government is “building a housing plan step by step” and that measures to increase the flow of buyers into the market were only possible after previous announcements to spur new construction.
“The main challenge in housing in Canada is supply, supply, supply, and we are responding accordingly,” he said.
Freeland joked that the latest mortgage changes “won’t be the last you hear from us on housing” with the fall session of Parliament underway.
New down payment requirements on insured mortgages
As part of her announcement, Freeland clarified new down payment requirements for an insured mortgage.
Currently, buyers taking out a federally backed mortgage must make a minimum down payment of five percent on the first $500,000 and a 10 percent down payment on the remaining portion, up to a maximum of an additional $500,000.
With the price cap rising to $1.5 million, Frreeland announced Tuesday that the 10 percent down payment requirements will simply be extended to cover the remainder of the purchase price, up to $1 million on a home.
For example, if a buyer obtains a secured mortgage on a home valued at $1.25 million, he or she will be required to pay five percent down on the first $500,000 and 10 percent on the remaining $750,000, for a total down payment of $100,000.
© 2024 Global News, a division of Corus Entertainment Inc.
