The Canadian housing market is about to see some serious changes. As of December 15, 2024, new mortgage rules are in effect that could alter the real estate landscape in a big way—especially for those trying to break into higher-priced markets. The biggest headline? Buyers will now be able to get Canada Mortgage and Housing Corporation (CMHC) mortgage insurance for homes valued up to $1.5 million.
The Canada Mortgage and Housing Corporation (CMHC), which previously capped insured mortgages at homes valued up to $1 million, is raising the ceiling by half a million dollars. And if you’ve been watching the skyrocketing home prices in cities like Toronto, Vancouver, and Montreal, you know why this change is a big deal.
Let’s break down what this means for buyers and sellers and why this rule change could be a game-changer (or a curveball) for both sides.
What’s the Deal with CMHC Insurance?
For those of you who might not be familiar with CMHC mortgage insurance, here’s the short version: It protects lenders in case a homebuyer defaults on their mortgage. If a buyer puts down less than 20% of the home’s purchase price, they must get mortgage insurance. Although paying for additional insurance may sound like a drag, keep in mind that without this option, many potential buyers could be stuck outside the market for years while trying to save up a full 20% downpayment. If home prices keep increasing, these buyers are stuck outside the market for longer, paying rent instead of building equity and waiting to pay a higher price for the same home in a few years. This can even mean never getting into the real estate market for some people since home prices often grow faster than personal savings.
What’s great about mortgage insurance is that it opens the door for more people to buy homes with lower down payments—think of it as a way to level the playing field, especially in red-hot real estate markets. Although CMHC insurance adds additional cost, it usually opens up an opportunity for buyers that far outweighs the cost in the long term.
Until now, CMHC insurance was only available on homes valued at up to $1 million. But let’s be honest: in 2024, that limit left many buyers on the outside looking in, especially in Canada’s priciest urban markets. With the new $1.5 million limit, more homes are back on the table for buyers who don’t have huge down payments.
How Buyers Will Be Affected
Here’s where things get interesting. For buyers, this is huge. The ability to get CMHC insurance for a home priced up to $1.5 million means that you no longer need a 20% down payment ready if you're looking at homes in that higher price range. Buyers no longer have to scramble for that significant amount of cash upfront. Instead of needing $300,000 for a down payment on a $1.5 million home, for example, you could be looking at something closer to $75,000 to $100,000, depending on the home, your income, and the lender's requirements.
This is a lifeline for young professionals and families trying to buy in cities where home prices seem out of reach. Suddenly, homes in more desirable neighborhoods might become a realistic option, even with a smaller down payment.
But there’s another side to this: demand is likely to spike. With more buyers now eligible for mortgage insurance in the higher price brackets, you will probably see increased competition for homes in the $1 million to $1.5 million range. Buyers previously priced out could rush into the market, potentially pushing home prices even higher in these segments. So, on the positive side, buyers have a new opportunity to explore more opportunities to buy a home. However, on the negative side, if this causes a spike in demand, home prices could get much higher in response to demand.
What About Sellers?
Sellers, this is your moment to pay attention. If you’ve been holding onto a home in that $1 million to $1.5 million range, you might be about to hit the jackpot. The expanded CMHC insurance eligibility means a wider pool of potential buyers, which again could increase demand for homes at these price points.
Let’s not forget that the more buyers compete for a limited number of properties, the more leverage you have as a seller. That means higher offers and faster sales. The rule change could ignite a mini-boom in specific markets where buyers previously couldn’t afford to make a move without the new insurance option.
As mentioned, this surge in demand could lead to inflated prices in the short term. If too many buyers flood the market, we could see serious bidding wars on some homes, which might artificially push prices higher than they should be.
The Long-Term Impact
Now, let’s zoom out and look at the broader picture. The Canadian government’s move to raise the CMHC insurance limit is an effort to make homeownership more accessible in a market that's out of reach for many people. It’s a response to the housing affordability crisis brewing for years.
But there’s a balancing act here. While more buyers being able to enter the market is great for demand, it also runs the risk of overheating an already challenging housing market. Those familiar with monetary theory will know that introducing more dollars into a market to chase the same number of goods and services only results in higher prices. That's because you're not actually generating more production; you're just printing money, which causes the value of those dollars to decrease (i.e., inflation).
The new change to CMHC rules could have a similar effect by extending additional financing options. Although the government isn't printing more money, the new rules could cause more buyers to take on bigger loans to buy homes. If that additional financing spikes demand, then prices will rise, and the value of Canadian dollars could see further erosion from inflation. So, while this new change to CMHC insurance serves as an opportunity for individual buyers, it could also harm the overall market.
If we see more competition and potential price surges, affordability could continue to be an issue in the long term. This might lead to additional government interventions, like stricter lending rules or new measures to cool the market if things get out of hand again.
The Bottom Line
For buyers, the new December 15, 2024 rules represent a major opportunity. If you’ve been eyeing homes in that $1 million to $1.5 million range but didn’t have the down payment saved up, this is your chance to get in the game. Just be aware that other buyers may be eyeing the same opportunity, which could lead to growing competition in 2025.
This is good news for sellers, especially those with homes priced between the $1 million - $1.5 million mark. Expect more interested buyers and potentially higher offers as people take advantage of the expanded mortgage insurance limits.
The housing market could get more intense. So, if you’re considering buying or selling, now’s the time to start preparing for the shift. Stay sharp, stay informed, and ensure you have a solid game plan because the real estate market may be about to heat up.
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I am a Victoria based local realtor with eXp Realty. My commitment to honesty, integrity, loyalty and hard work have been important pillars for me because they drive a high standard of excellent service for my clients. Helping you realize your dream is my goal!
I service Vancouver Island, but my focus is on: Victoria, Sooke, Saanich, Malahat, Shawnigan Lake, Cobble Hill, Duncan, and the rest of the Cowichan Valley.
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