Report by TD Economics

Highlights

• On December 15th, the federal government will roll out mortgage rule changes that make it easier to purchase a home for those taking out insured mortgages.
• These measures should offer a lift to Canadian home sales and prices next year. However, their impact will be blunted by an array of factors, including the affordability erosion induced by their implementation.
• Mitigating the impacts of these policies may be positive from a financial stability perspective, as the measures will likely encourage households to take on more debt at a longer term, and insured borrowers have typically been more prone to bouts of financial stress.

The federal government has recently announced two changes to Canadian mortgage rules (effective December 15th, 2024) that will make it easier to qualify for purchasing a home. As the surge in home sales early in 2024 (amid a steep drop in bond yields at the end of last year) and in the spring of 2023 (after the Bank of Canada paused its rate hiking campaign) taught us, Canadian housing market activity can be highly reactive. Yet, we don’t think that these measures alone will unleash a housing boom. Instead, they’ll likely offer a secondary tailwind to a market that’s already gaining decent traction in 2025 on the back of lower borrowing costs and a gradually improving economy (see here). What’s more, the affordability boost offered by these measures will likely also erode as home prices are raised by their implementation, thereby limiting their effectiveness.

https://economics.td.com/ca-mortgage-rule-changes