Effective August 1^st, 2024, the Department of Finance will now allow homeowners purchasing a newly built property and who meet First Time Home Buyer (FTHB) criteria, the option of a 30 year amortization for insured mortgages.

At least one borrower to be a FTHB, defined as below:

• • • The borrower has never purchased a home before; or
    • In the last 4 years, the borrower has not occupied a home as a principal place of residence that either they themselves or their current spouse or common-law partner owned; or
    • The borrower recently experienced the breakdown of a marriage or common-law partnership.
• At least one borrower must occupy the property
• Eligible Properties:
  • Available for 1 – 4 Units
  • Owner Occupied or Partially Owner Occupied
  • Newly built homes and condos ONLY
• Insurer Premium – surcharge of 0.20% applicable to loans where amortization is >25 years
• Eligible loan type – Purchase, Purchase Plus Improvement, Port/Replacement
• Ineligible loan type – Small Rental and Secondary Home Programs

Please reach out to me with any questions.

We are pleased to inform you that today the Bank of Canada reduced its target for the overnight rate by 25 basis points to 4.75 per cent. This is the first interest rate cut since the tightening cycle began in March 2022.

Although there will likely be no significant changes to fixed mortgage rates in the short term, the CMBA-BC is strongly encouraged by this rate reduction, viewing it as a positive step towards alleviating the financial pressure on mortgage holders, borrowers, and homebuyers across British Columbia. Variable Rate Mortgages and Home Equity Lines of Credit will benefit from this rate drop as the prime lending rate decreases, which is welcome news to those borrowers.

“A rate cut is crucial to provide the first steps of relief to mortgage holders and borrowers across the province,” said Rebecca Casey, President of the CMBA-BC. “We are pleased that the Bank of Canada has begun to ease the financial burden on homeowners and homebuyers.”

CMBA-BC advocates for action to bring relief to mortgage holders and homebuyers in British Columbia, including in the form of lower interest rates.

The Canadian economy has shown meaningful signs of slowing, with the first-quarter growth rate of 1.7 per cent falling short of the Bank of Canada’s forecast of 2.8 per cent and economists’ estimates of 2.2 per cent, according to Statistics Canada. Inflation has also seen a significant decline. The annual CPI inflation rate peaked at 8.1 per cent in June 2022 but has since fallen to 2.7 per cent in April, comfortably within the Bank’s target range of 1 per cent to 3 per cent.

Due to elevated interest rates, on a year-over-year basis, the cost of shelter in British Columbia was up again in April according to BC Stats, with the cost of homeownership up 7.2 per cent and the cost of renting increasing 7.1 per cent. Many British Columbians are already at a tipping point.

CMBA-BC will continue to advocate for policies that support mortgage holders and facilitate a stable, prosperous housing market in British Columbia.

The next scheduled date for announcing the overnight rate target is July 24, 2024. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

Published by the CMBA -Canadian Mortgage Brokers Association

Some advocates are praising Ottawa’s move to lengthen the amortization period on insured mortgages for certain homebuyers, but say expanding the policy to all Canadians would help make home ownership more affordable.

Speaking in Toronto on Thursday, Finance Minister Chrystia Freeland announced the federal government will allow 30-year amortization periods on insured mortgages for first-time home buyers purchasing newly built homes.

The change will take effect Aug. 1.

Under the current rules, if a down payment is less than 20% of the home price, the longest allowable amortization — the length of time a homeowner has to repay their mortgage — is 25 years.

“Faced with a shortage of housing options and increasingly high rent and home prices, younger Canadians understandably feel like the deck is stacked against them,” Freeland said in a news release.

“By extending amortization, monthly mortgage payments will be more affordable for young Canadians who want that first home of their own.”

Mortgage Professionals Canada CEO Lauren van den Berg called it a “step in the right direction” and said extending the amortization period “will help level the playing field for first-time home buyers.”

“We know that this is going to allow greater opportunities for home ownership and will ultimately contribute to economic revival and economic recovery,” she said in an interview.

“But more still needs to be done for all Canadians to have that dream of home ownership within sight.”

Van den Berg said the government should expand the option to all Canadians purchasing a home, regardless of whether it is a new build or a pre-existing home.

“There are a lot of areas, particularly in the Greater Vancouver area and in the Greater Toronto Area, where you have no choice but to build up, so the possibility for new builds are not the same across the country.”

Ratesdotca mortgage and real estate specialist Victor Tran also raised concerns about how effective the change would be based on the eligibility criteria.

“While it’s currently possible to get an insured mortgage with a new build, it’s rare,” he said in a statement.

Tran also pointed out many properties in Vancouver and Toronto are priced at more than $1 million, which typically means buyers have to take uninsured mortgages.

But Canadian Home Builders’ Association CEO Kevin Lee said the announcement would be a “game changer.” The group has also been in favour of longer amortization periods, saying five more years would help with affordability and spur more construction.

“This measure will also go a long way to enable our sector to respond to the government’s goal of getting 5.8 million new homes built over the next decade,” he said in a statement.

“This measure is needed now to help turn the market around, and will be needed for many years to come if we are to work towards doubling housing starts.”

He said the rental market should see some relief too, as the move could enable some Canadians to stop renting and become homeowners.

As part of the announcement, Freeland also said the government will raise the amount first-time homebuyers can withdraw from their RRSPs — to $60,000 from $35,000 — to buy a home. That will take effect April 16, the day the federal budget is set to be released.

The government said the change reflects the reality that the size of a down payment and the amount of time needed to save up for one are much larger than they used to be.

People who have made or will make withdrawals between Jan. 1, 2022, and Dec. 31, 2025, are also getting more time to begin repayment — up to five years in total rather than two.

Ottawa said those changes are meant to work in tandem with the First Home Savings Account, which it launched last year. The rules governing that program allow prospective home buyers to start saving for up to 15 years once they open an account, with an annual $8,000 deposit cap and a lifetime contribution limit of $40,000.

Freeland said more than 750,000 Canadians have opened an FHSA to date. While the program came online April 1 of last year, most Canadian financial institutions only began offering the account as of last summer or fall.

Ottawa also announced changes to the Canadian Mortgage Charter that will include an expectation that financial institutions offer permanent amortization relief to protect existing homeowners who meet certain eligibility criteria.

That would allow eligible homeowners to reduce their monthly mortgage payment to a number they can afford for as long as needed.

Published by Canadian Mortgage Trends