Canada’s mortgage-insurance changes could help some buyers enter the market but also push prices and household debt higher, TD economist Rishi Sondhi warned in October 2024. He described the package as a “double-edged sword” because it increased purchasing power without immediately increasing the number of homes available.
Two changes taking effect in December
The federal government said that, from December 15, 2024, 30-year amortizations for insured mortgages would be available to all first-time buyers and to anyone buying a newly constructed home. The previous standard maximum for many insured borrowers was 25 years.
Ottawa also raised the price ceiling for an insured mortgage from $1 million to just under $1.5 million. Mortgage insurance generally applies when the down payment is below 20 per cent, subject to income, credit, debt-service and occupancy requirements.
How the down payment worked
For an eligible home, a borrower still needed at least five per cent down on the first $500,000 and 10 per cent on the portion above that amount. A higher insurance ceiling did not mean a buyer could automatically borrow $1.5 million, and properties priced at $1.5 million or more remained outside the measure.
Lenders and insurers were still required to assess whether the household could carry the debt. Closing costs, property tax, insurance, utilities and maintenance also sat outside the advertised down payment.
Lower payment, longer debt
Stretching repayment over 30 years reduces the scheduled monthly payment at a given interest rate. It also leaves the mortgage outstanding longer and normally increases total interest if the borrower follows the schedule for the full amortization.
The lower payment can help a qualified household manage cash flow, particularly when buying a new build. It should not be mistaken for a reduction in the purchase price or the principal owed.
TD’s demand forecast
Sondhi estimated that the combined changes could raise a typical buyer’s purchasing power by roughly nine per cent. TD’s analysis projected home sales and prices could be two to four percentage points higher by the end of 2026 than they would have been without the reforms.
That forecast was a model, not a guaranteed outcome. Interest rates, employment, construction, population growth and regional supply could all change the result. Its central warning was that additional credit can be capitalized into prices when too many buyers compete for too few homes.
Who was most affected
The higher insured-mortgage ceiling mattered most in expensive markets such as Toronto and Vancouver, where a meaningful share of properties fell between $1 million and $1.5 million. TD estimated that a household considering a home near $1.45 million could need income above $225,000, depending on rates and other obligations.
The policy therefore did not turn high-priced housing into an option for most renters. It mainly changed financing access for households that already had substantial income but lacked a 20 per cent down payment.
Financial-system concerns
A smaller equity cushion makes a household more exposed if prices fall or income is interrupted. Beginning with a 30-year schedule also leaves less room to extend amortization later when rates rise, a method some borrowers use to reduce payments temporarily.
Government-backed insurance protects the lender against default; it does not erase the borrower’s debt or the disruption of losing a home. Insurers charge a premium that is commonly added to the mortgage balance.
The supply test
Finance Minister Chrystia Freeland argued that the changes would give first-time buyers a better opportunity and that including new construction would support supply. The lasting affordability result depended on whether builders could add homes fast enough to absorb the extra demand.
For an individual buyer, the sensible comparison remained the same: calculate payments at renewal as well as at the introductory rate, include all ownership costs and leave a financial buffer. The rules expanded eligibility, but they did not make the maximum available loan the safest amount to borrow.
