Finance Minister Chrystia Freeland announced changes that will raise the $1-million price cap for insured mortgages to $1.5 million and expand eligibility for 30-year mortgage amortizations.

“We are increasing the insured mortgage cap to reflect home prices in more expensive cities, allowing homebuyers more time to pay off their mortgage, and helping homeowners switch lenders to find the lowest interest rate at renewal,” she said on Monday.

Both changes take effect on December 15, 2024. The insured mortgage cap, which hasn’t been adjusted since 2012, is increasing to help Canadians qualify for a mortgage with a downpayment below 20 per cent.

All first-time homebuyers and buyers of new builds, including condos, will also be eligible for 30-year mortgage amortizations.

This builds on the budget 2024 commitment, which came into effect this year on August 1, permitting 30-year amortizations for first-time homebuyers of new builds. The Canadian Mortgage Charter was also updated so that insured mortgage holders can switch lenders at renewal without being subject to another mortgage stress test.

Industry members like the Canadian Home Builders’ Association is hoping the new mortgage rules will drive more housing construction and supply.

“These types of changes are exactly what CHBA has been calling for, because we simply can’t build homes, be they condos, townhomes or whatever housing form makes sense, if owners can’t qualify for mortgages.” said CHBA CEO Kevin Lee.

He said better access to mortgages is an important step forward to incentivize housing starts, but builders will still need lower development taxes and permitting, zoning and other local regulation adjustments to boost supply faster.

“If we don’t quickly start building more houses, falling interest rates will create more demand on the limited number of homes available, further driving up prices, he added. “We need to come at the housing shortage from every angle, and adjusting mortgages rules is a big part of that.”