The federal government’s new mortgage reforms, effective December 15, 2024, significantly increase the price cap for insured mortgages to $1.5 million and extend 30-year amortization to all first-time buyers and new builds. This change is expected to make mortgages more accessible, especially in high-cost areas like Vancouver. By lowering monthly payments and enabling more people to qualify for insurance, these reforms are likely to stimulate demand, support new construction, and ease affordability concerns in British Columbia’s real estate market.

Here’s the link to the federal government’s announcement for more details.

Anticipated Impact of Federal Mortgage Reforms on BC Real Estate

On September 16, 2024, the federal government announced sweeping changes to mortgage regulations, poised to reshape British Columbia’s real estate landscape. The two key measures—raising the price cap for insured mortgages to $1.5 million and expanding eligibility for 30-year amortization—will have profound effects on housing affordability, buyer access, and market dynamics in the region.

Increased Price Cap for Insured Mortgages

One of the most significant reforms is the increase in the insured mortgage price cap from $1 million to $1.5 million. This update, effective December 15, 2024, brings the mortgage insurance program in line with the current housing market realities, particularly in high-cost cities like Vancouver. For buyers with less than a 20% down payment, this opens up more opportunities to secure a home under this program. Previously, Vancouver’s real estate market, where the average price often exceeds $1 million, left many buyers unable to benefit from insured mortgages. With this higher threshold, more buyers can now access mortgage insurance, allowing them to borrow up to 95% of the purchase price, making homeownership more attainable despite the hefty price tags.

Extended Amortization Periods

In addition, the expansion of the 30-year amortization period to all first-time homebuyers and new builds will significantly reduce monthly mortgage payments. This is especially crucial for younger buyers and those entering the market for the first time. Extending amortizations by an additional five years compared to the standard 25-year term provides immediate relief by lowering the monthly financial burden. This move will likely stimulate increased demand for new builds, further supporting the federal government’s broader goal of incentivizing housing construction to meet supply shortages.

Medium-Term Impact on BC’s Real Estate Market

The combination of these reforms is expected to have a notable impact on BC’s housing market over the medium term. By making homeownership more accessible to a broader demographic, particularly first-time buyers, there will likely be an increase in demand for both new and existing properties. This could drive home prices up slightly, particularly in sought-after urban areas like Vancouver, as more buyers are able to enter the market.

However, these changes may also help stabilize the market by increasing the number of homes being built. As builders see heightened demand for new constructions, we can expect more projects to be initiated, helping to alleviate supply constraints over time. For BC, where housing shortages have been a key concern, this is a welcome development that aligns with both provincial and federal housing strategies.

The federal government’s latest mortgage reforms are set to provide much-needed relief and opportunity for BC homebuyers, especially in the face of high prices and market volatility. These changes will expand buyer eligibility, encourage more construction, and help the market remain competitive and dynamic, ultimately benefiting both buyers and sellers in the medium term.

For additional insights into these changes you may also want to read the following article posted on Forbes Advisor: https://www.forbes.com/advisor/ca/mortgages/feds-annouce-mortgage-reform-insured-mortgage-amortization/