Despite the political shakeup, the fiscal update went ahead, revealing a projected deficit of $61.9 billion for the current fiscal year—54% higher than the $40.1 billion deficit previously forecast by the government.
While many of the announcements were focused on fiscal pressures, housing policies took a prominent role in today’s statement.
While much of the Fall Economic Statement reiterated previously announced programs and provided updates, there were some notable new measures. Among them was the removal of the stress test for low-ratio insurable mortgages when switching lenders at renewal, aligning federal rules with OSFI’s recent decision. (More on that below)
The government also plans to review and consult on potential improvements to the stress test for insured mortgages.
However, with political tensions running high and growing calls for a non-confidence vote that could trigger an election, any new announcements in the Fall Economic Statement are already facing uncertainty about whether they’ll see the light of day.
NDP Leader Jagmeet Singh today called on Prime Minister Justin Trudeau to resign, stating that “all options are on the table” for a vote of non-confidence against the government. In an interview with CBC News, NDP House Leader Peter Julian added that if Trudeau hasn’t stepped down by late February or early March, “a vote of no confidence is one of the tools we have.”
Mortgage industry expert Ron Butler of Butler Mortgage said it’s unlikely many of the new announcements in today’s FES will come to fruition.
“It’s important to note that no rule change that hasn’t been scheduled or any project that hasn’t actually started (like CRA income verification) is finished,” he told Canadian Mortgage Trends. “The Liberal Government is finished [and] all “proposed” changes are dead.”
Earlier in the day, Housing Minister Sean Fraser announced he will not seek re-election, adding to the growing list of Liberal ministers stepping away from politics ahead of a potential election.
Highlights of new housing initiatives
Despite political turbulence surrounding the government, the Fall Economic Statement introduced several notable housing measures aimed at improving affordability and supply. Here are the highlights of the latest initiatives:
Stress test removed for insurable mortgage switches, aligning with OSFI’s rule
The federal government has announced that, effective December 16, 2024, borrowers with low-ratio mortgages (loan-to-value ratios up to 80%) can now switch lenders at renewal without needing to re-qualify under the stress test—provided the mortgage meets the “straight switch” criteria.
“The government is amending the mortgage insurance rules to remove the stress test requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance for the mortgage,” the FES reads.
This move aligns the Department of Finance’s policy for insured and insurable mortgages with OSFI’s recent decision to remove the stress test for uninsured (low-ratio) mortgage renewals.
OSFI’s change applies to mortgages regulated by federally regulated financial institutions (FRFIs), while today’s announcement explicitly extends the exemption to portfolio-insured mortgages. These are commonly used by lenders to bulk-insure low-ratio loans for securitization purposes.
The key criteria for this exemption include:
- The mortgage must have been stress tested when it was first issued.
- It must qualify as a “straight switch”—meaning the loan balance remains the same, with no equity take-out except for up to $3,000 to cover transaction costs.
- The amortization period must remain consistent with the existing mortgage.
The government also said it will launch consultations on “ways to improve the structure and effectiveness of the stress test on insured mortgages.”
Learn more here.
Government to explore long-term fixed-rate mortgages in Canada
The federal government said it will launch consultations to examine the barriers to offering long-term fixed-rate mortgages, an option that is common in countries like the United States but remains rare in Canada.
While Canadian lenders can offer mortgages of any term, most borrowers choose terms of five years or less. By comparison, 30-year fixed-rate mortgages are widely available in the U.S., providing borrowers with predictable payments over the long term, though often at higher interest rates and with fewer flexibilities than Canadian mortgages.
“The government is examining the barriers to making long-term mortgages more widely available in Canada and offering more options to borrowers looking for a mortgage,” the FES noted.
Additional housing updates
- Secondary suites funding: (Previously announced last week) Loan limits for secondary suite programs have been doubled to $80,000, offering homeowners more affordable financing options. In addition, the loans will be offered at a 2% interest rate with a 15-year term.
- Consultations on curbing corporate purchases of single-family homes: On November 19, 2024, the government launched consultations to explore restricting large corporate investors from purchasing existing single-family homes. The aim is to assess investor activity’s impact on housing affordability and gather feedback from Canadians, provinces, territories, and stakeholders. Input is being accepted until December 19, 2024, at consultation-housing-logement@fin.gc.ca. Further details are expected in Budget 2025.
- Update to CRA income verificaton: The federal government is advancing plans to fight mortgage fraud through income verification. The CRA has been consulting with experts and mortgage lenders this fall to design a secure and user-friendly tool to help financial institutions spot fraud. The agency says implementation of the new system is set to begin in early 2025.
- Additional funding for the Greener Homes Loan: The Canada Greener Homes Loan Program offers interest-free loans of up to $40,000 over 10 years to help homeowners reduce energy costs. The 2024 Fall Economic Statement adds $600 million to the program, supporting an additional 15,000 to 24,000 homeowners. This expansion aligns with Canada’s goal of achieving net-zero emissions by 2050 and comes with a fiscal cost of $174.4 million over six years starting in 2024-25.
- Update on First-Home Savings Account uptake: The government revealed that nearly 1 million Canadians have opened a Tax-Free First Home Savings Account (FHSA) to start saving for a down payment. The program, launched in 2023, allows first-time homebuyers to save up to $40,000 tax-free, providing a significant boost for those looking to enter the housing market.
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Chrystia Freeland CRA income verification Fall Economic Statement FES FHSA First Home Savings Account Greener Homes Loan Jagmeet Singh liberals mortgage switch ndp no-confidence vote Peter Julian ron butler secondary suites
Last modified: December 16, 2024