New 30-year mortgages are coming and the devil’s in the details

Last week, two months after the Liberal government moved to introduce 30-year amortization for insured mortgages, the Canada Mortgage and Housing Corporation (CMHC) announced that it will boost its premium for this type of mortgage by 20 basis points.

Starting Aug. 1, Canadian first-time homebuyers purchasing a newly built home for less than $1-million with a down payment smaller than 20 per cent will be able to opt in to an insured 30-year amortization period – up from a 25-year maximum – with the additional 0.2 per cent premium hike.

The new mortgage policy was designed to make home ownership more tenable for young Canadians by curbing monthly mortgage costs, according to Finance Minister Chrystia Freeland. But the strict eligibility requirements and CMHC’s recent premium hike have cast doubts on the true benefit of the new policy for housing affordability.