Prime Minister Justin Trudeau suggested the Canadian government plans to make changes that will affect the mortgage sector in its April 16 budget.
Canada forbids homebuyers from taking out insured mortgages with amortization periods of longer than 25 years. At a news conference Friday, Trudeau was asked whether his government would extend the limit to 30 years or more — a measure that would ease monthly payments and help some buyers who are currently shut out of the market.
The prime minister wouldn’t comment directly on that, but said: “On mortgages we will have more to say between now and the budget date on April 16, and perhaps we will save it for April 16.”
Trudeau, who’s under significant political pressure over the country’s housing shortage, has been making a series of pre-budget announcements aimed at easing concerns over housing costs. Many have been focused on improving the cost and availability of rental housing.
Last week, Trudeau pledged that his government will ensure that tenants who pay their rent on time will see better credit scores when they apply for a mortgage. Some experts have been pushing the government to loosen mortgage rules, particularly for younger homebuyers, to give them better access to Canada’s pricey housing market.
“Why do we tell a 35-year-old that they have to have their home paid off by the time they’re 60?” Mike Moffatt, a policy director at the Smart Prosperity Institute and a former Trudeau economic adviser, said in an interview with Bloomberg last month.
Canada briefly experimented with allowing insured mortgages as long as 40 years, but reversed course when poor mortgage underwriting by US lenders led to cascading defaults that contributed to the global financial crisis in 2008.
The current limit of 25 years has been in place since 2012, and applies to loans where government-backed mortgage default insurance is required.
Such insurance is mandatory in cases where the buyer is putting down less than 20 per cent of the price of the home. In Toronto and Vancouver, the benchmark price of a home is more than $1 million, meaning a downpayment of more than $200,000 is needed before an individual or family can qualify for an uninsured mortgage with a longer amortization period.
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