Praise and caution: Ottawa’s 'bold' new mortgage rules
Ottawa’s new mortgage rules set to take effect at the end of the year are drawing both praise, and caution in southern Ontario.
Last month, the federal government announced it was making the "boldest mortgage reforms in a decade" aimed squarely at young people trying to buy a home.
"I would not want to be a first-time homebuyer at this moment in time," said Fred Godbolt, a financial advisor with GC Financial Solutions Group Inc. based in Exeterm Ont.
The changes will see the government insure larger mortgages, increasing the price cap from $1 million to $1.5 million and expand eligibility for 30-year mortgages to all first-time homebuyers as well as those buying new builds. In a news release, the government identifies high mortgage payments as a barrier to homeownership “especially for Millennials and Gen Z.”
The moves are somewhat concerning for Godbolt, who points to increased carrying costs as a potential budget buster for many looking to enter the market and preaches caution for those looking to buy.
"I don't think this increases affordability for lots of people," said Godbolt. "I think the problem is carrying the $1.5 million of mortgage, not the fact that you can pay it over 30 years versus 25 years."
The increased price cap is the first update since 2012 and Godbolt describes it as “keeping current” with market trends.
"There are markets where housing doesn't exist sort of under a million dollars," said Godbolt.
The new changes aren’t set to take effect until Dec. 15.
Cost caution
The Canada Mortgage and Housing Corporation (CMHC) earmarks “affordable” housing at 30 per cent of before tax income for a household budget, including the cost of utilities and any municipal services.
The average sale price of a home in Windsor-Essex in September was $579,290. According to the Canadian Mortgage App, that purchase amortized over 25 years at an initial 4.49 per cent would put the mortgage payment at $2,548.44 a month.
A CMHC report in 2021 puts the average household income before taxes in Windsor at $102,300.
"It certainly helps. It helps from a cashflow perspective," said Godbolt. "Obviously, on a longer-term basis, you pay more interest."
Approach praise
Ottawa’s announced changes are receiving praise from the Windsor-Essex County Association of Realtors (WECAR) for its measures targeting first-time buyers struggling to secure a home.
“We applaud these changes because, at this moment, this is the best I think the government can do,” said Maggie Chen, the president of WECAR. “We cannot crash the market. Absolutely not.”
Chen points to monthly mortgage payment relief as an important step to making home ownership more attainable for more people.
She says it doesn’t only improve the monthly budget picture but can improve financing ratios to fund a home purchase.
Chen paints it as a question of financial priorities.
“Pay more interest throughout the whole 30 years, correct; but you can become a homeowner and start to build your equity,” said Chen. “It depends on what priority you take.”
Bonanza bounceback
Godbolt noted a criticism of the changes is that they will feed further demand for housing and won’t bring prices down.
"This could in fact create more demand and that in fact may make prices go back up," said Godbolt. "What we really need is more affordability here. We need more supply."
In recent months, home sales in Windsor-Essex have been stagnant and the market has seen little fluctuation. Sales were down for four straight months beginning in March before July’s figures matched year-over-year sales numbers and the number of homes sold climbed a meagre 0.22 per cent year-over-year in August.
“The market has been staying very quiet and flat as a pancake,” said Chen.
September has seen some signs of increased activity with 422 homes sold, representing an 8.48 per cent sales climb from the same time last year while listings have climbed 23.52 per cent over that same period.
Chen doesn’t expect the changes coming later this year to lead to a “supercharged” housing market, the likes of which were seen during the pandemic where housing prices and activity soared.
CTVNews.ca Top Stories
Economic experts call it 'terrible policy,' but most Canadians support expansion of Old Age Security benefits: Nanos survey
Amid new polling indicating most Canadians support boosting Old Age Security benefits by 10 per cent for seniors aged 65 to 74, a former Liberal finance minister and former Bank of Canada governor are warning the government not to pursue the policy change.
Tax rebate: Eligible Canadians to receive GST/HST credit payment on Friday
Canadians who are eligible for a GST/HST tax credit can expect their final payment of the year on Friday.
WestJet ordered to reimburse B.C. passenger for hotel, despite claim bill was 'excessive'
WestJet failed to convince a B.C. tribunal that a woman whose flight was delayed for three days spent an "excessive" amount on a hotel room, and the airline has been ordered to pay her full bill.
Israeli airstrikes rock southern suburbs of Beirut and cut off a key crossing into Syria
Israel carried out a series of massive airstrikes overnight, hitting suburbs of Beirut and cutting off the main border crossing between Lebanon and Syria for tens of thousands of people fleeing Israeli bombardment.
These Ontario condo owners say they are facing special assessment of $70K
The owners of a North York condominium say they are facing a $70,000 special assessment to fix their building's parking garage. '$70,000 is a lot of money. It makes me very nervous and stressed out of nowhere for this huge debt to come in,' said Ligeng Guo.
Dozens of zoo tigers die after contracting bird flu in southern Vietnam
More than a dozen tigers were incinerated after the animals contracted bird flu at a zoo in southern Vietnam, officials said.
REVIEW 'Joker: Folie a Deux': A study in fantasy, obsession and the ordinariness of evil
CTV's film critic Richard Crouse says 'Joker: Foli a Deux' is a study in fantasy, the ordinariness of evil, and obsession.
Garth Brooks accused of rape in lawsuit from hair-and-makeup artist
A woman who says she worked as a hair-and-makeup stylist for Garth Brooks alleged in a lawsuit filed Thursday that he raped her in a Los Angeles hotel in 2019.
DoorDash driver who appeared to spit in Ontario man's drink removed from platform
A DoorDash driver who was caught on camera appearing to spit into an Ontario man’s drink has been removed from the platform, the food delivery company has confirmed.