Navigating the Mortgage Updates in Canada

Mortgage renewals, updates and rate changes, have been everything anyone is talking about. No surprise after we watched the interest rates increase from February 2022 and hold at 5%, from July 2023 to June 2024. Thankfully we have seen in the past 4 months a decrease in the interest rate, a total 0.75% to 4.25%. It may not seem like much, but when you look at the big picture costs of home ownership, it can mean no longer having to worry about being able to afford your home upon mortgage renewal. Keep in mind there are still two more interest rate announcements from the Bank of Canada scheduled before the end of the year - the next is on October 24th. Many predict that the next announcement could be another 0.5% reduction with the possibility of a new Bank of Canada rate of 3.5% by January 2025. 

When it comes to the updates, we can understand why you may be confused by the changes and the actual impact for you as a current homeowner or first time buyer. So let’s take a closer look. 

30-Year Amortization Period 

Currently you are only able to get an insured mortgage with a 30-year amortization period if you have 20% down. The only exception was for first-time home buyers who are purchasing a new build with a lower down payment. Come December 2024, insured mortgages with less than 20% down will have a 30 year amortization period, rather than just the 25-year option, whether it is an existing home or newly built. 

What does this mean for you? It could mean lower monthly payments, with an extended term the mortgage total is spread across a longer period of time. With this change you can benefit from this extended term for both new and existing properties. 

Effective date: December 15, 2024

Purchase a Home for $1,500,000 Without 20% Down

By increasing the price cap for insured mortgages, with less than 20% down, we can expect more opportunities for those entering the real estate market. Currently if you don’t have 20% to put towards your down payment, you would be unable to get an insured mortgage for more than $1,000,000. This insured mortgage cap of $1,000,000 has not been adjusted since 2012, and now at $1,500,000 it will better reflect current housing market conditions. 

How might this help you? The idea is that this will give more people the opportunity to buy in more popular areas, and the number of homes they are choosing from can be greater. 

Effective date: December 15, 2024

No More Stress Test for Mortgage Renewals 

It was recently announced by OFSI (Canada’s banking regulator) that they will remove the requirement of the stress test for those looking to switch lenders at the time of their renewal. Previously once you bought your home and committed to a lender, you would be faced with another stress test come the time of your renewal if you wanted to change lenders. Therefore most consumers would be forced to stick with their current lender, no matter how different your situation is at renewal. 

What does this look like for you? At your mortgage renewal, you can qualify at your new mortgage rate without having the added 2% stress test. Giving the opportunity to everyone to shop around for better rates upon renewal. No longer will you feel stuck with your original lender if there are better options out there. Be sure to reach out to your mortgage broker when you are getting close to your renewal date. 

Follow Up Announcement: November 21, 2024 

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According to one of our local mortgage brokers, Bob Beach of the Burlington Mortgage Centre, “we are seeing rates dipping close to the low 4s, with a recent 5-year fixed at just 4.19%! If you are house hunting, I encourage you to update your pre-approval—you might be pleasantly surprised by how much more you can afford!” 

Whether you are ready to make a new home purchase, already looking at new properties or preparing for a mortgage renewal, be sure to reach out to your mortgage broker to see what options are out there for you. We have multiple within our community that we would recommend and you can find them in our Blue Book of Trusted Contacts.