Real Estate Talk:
New mortgage rules
How the new rules will help to ease home purchases
By Joseph Marovitch
October 9, 2024
Canada’s Minister of Finance Chrystia Freeland introduced new mortgage rules that present better opportunities for buyers to acquire property. The new rules are in effect as of August 1, 2024, and they include:
- As of December 1, 2024, the cap on insured mortgages will increase from $1 million to $1.5 million permitting buyers to purchase a property with less than 20% down.
. - Amortization periods have been extended to 30 years from 25 years allowing lower monthly mortgage payments for first-time homebuyers and new construction purchases.
. - Borrowers who have reached the renewal period of their mortgage can now switch lenders due to a lower interest rate or better terms, without another mortgage stress test.
. - Introducing a new rule allowing buyers to save up to $8,000 in a tax-free savings account and take it out tax-free to apply to a down payment.
All these changes will make banks more competitive in their lending rates and terms, increase demand, and raise property values.
It has been a rough time for buyers and sellers since the pandemic, followed by two wars that have caused increased inflation and high interest rates. However, this past summer, especially in the past month, world issues have become calmer. The supply chain has eased up, causing inflation to decrease to its current 2% and interest rates to fall.
All these changes will make banks more competitive in their lending rates and terms, increase demand, and raise property values.
These factors, along with the new mortgage rules, should make it easier for buyers to acquire a mortgage. They also create increased demand so that a seller’s property value can rise. We must keep following this path in our economy and the only way the economy and real estate market will continue to improve is if calmer minds prevail among world leaders. All we need is peace and stability.
Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.
Next article: A window of opportunities for buyers
State of the market
According to RBC economist Jordan Fleguel, recent interest rate cuts have improved housing affordability but not significantly. Rate cuts have also slightly increased property values and the housing market will improve over the next year or more but not immediately.
Rachel Battaglia states in the RBC Economics report on October 8, 2024, that the Montreal real estate market is slightly improving though potential buyers are hesitant to purchase as they wait for rates to decrease further. According to this report, there was a large decline in new listings this year as sellers also waited for more rate cuts. She also states the market will improve with further rate cuts.
These predictions being stated really depend on geopolitical factors. On October 8, the price of oil began to increase due to the escalation of the war in the Middle East. There is a U.S. election in a few weeks which, depending on the outcome, will affect the market significantly one way or the other.
‘Now is a safe time to buy or sell. Future conditions are uncertain in that investors can either win or lose. Investors should carefully weigh all the pros and cons in their decision to wait for future gains or act now.’
Many sellers are waiting for rates to drop further so their values will rise, and more rate cuts are expected as inflation decreases. However, it should be noted that currently mortgage rates are lower than they have been since the end of the pandemic. In the next few months, depending on world events, the rates will either go north or south. Right now, sellers know what their homes are worth, and buyers know what their costs will be regarding the present investment for a newly purchased property.
Currently, there is slightly more inventory and demand. As mentioned before, future rates, inflation, and values can either improve or worsen. Now is a safe time to buy or sell. Future conditions are uncertain in that investors can either win or lose. Investors should carefully weigh all the pros and cons in their decision to wait for future gains or act now.
Have a great week.
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Other articles by Joseph Marovitch
Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep-away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or josephmarovitch@gmail.com
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