Changing Mortgage Rules Again: Freeland Announces Permanent Amortization Extension
Deputy Prime Minister and Finance Minister Chrystia Freeland revealed a series of significant housing affordability initiatives on Thursday aimed at easing the burden on both aspiring homeowners and current property owners across Canada.
In a press conference held in Toronto, Freeland expressed her optimism regarding the impact of the measures, stating, “I really hope and believe the specific measures we announced today are going to provide a lot of comfort and a lot of hope to young Canadians.”
Among the key announcements was an expansion of the Canadian Mortgage Charter introduced in the fall, mandating banks to engage with homeowners well in advance of their mortgage renewal dates. Freeland disclosed that lenders will now be required to reach out to borrowers up to 24 months before their mortgage renewal to explore affordability options, providing an extended window for proactive discussions.
Further enhancements to the Mortgage Charter include the transformation of temporary extensions on the amortization period into a permanent feature. This adjustment allows mortgage holders facing financial difficulties to extend their amortization periods, even for those with insured mortgages, without incurring additional fees or penalties.
Effective April 16, the maximum withdrawal limit from Registered Retirement Savings Plans (RRSPs) for first-time homebuyers will skyrocket from $35,000 to $60,000. Freeland highlighted the synergy between this increase and the Tax-Free First Home Savings Account program, which permits Canadians to save up to $8,000 annually towards a home without taxation on growth or withdrawals for down payments.
In a move aimed at easing repayment burdens, the government is extending the grace period for RRSP withdrawal repayments from two years to five years for withdrawals made between Jan. 1, 2022, and Dec. 31, 2025.
Freeland’s announcements come in the wake of a report by the parliamentary budget officer, which underscored the urgent need to bridge Canada’s housing gap by constructing 1.3 million additional homes by 2030. While the Liberal government has been proactive in unveiling housing initiatives, the opposition Conservative Party lamented the persisting housing crisis, citing the PBO’s findings.
“Canadians are living through this housing hell because Trudeau has failed to build enough homes for Canadians to live in,” the Conservative Party said in a statement, adding that eight years of Prime Minister Trudeau’s government left Canada with a “historic housing crisis.”
The Canadian Home Builders’ Association lauded the government’s measures, particularly the extension of the amortization period, emphasizing its potential to stimulate the housing market and bolster construction activity.
“Through this announcement, the government has recognized that we need to get first-time home buyers into the market,” said CHBA CEO Kevin Lee.
Information for this briefing was found via CBC and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
