Though home prices have dropped gradually in Niagara, they continue to be less than affordable for many, especially first-time buyers. Yet with drops in interest rates starting to attract buyers on the sidelines, marginal price increases are possible for 2025.

CREA Predicts

Currently, the Canadian Real Estate Association (CREA) predicts that “home prices in the Niagara Region are expected to increase by 2% in 2025,” and 6.6% nationally.

New Downpayment Rules Effective in December

As of December 14th, the price cap for an insured mortgage will increase from $1,000,000 to $1,500,000. Instead of an uninsured minimum requirement of 20% or $300,000 on 1.5 M, buyers can take advantage of the following new and insured downpayment requirements:

• 5% down on the first $500,000 or $25,000,
• 10% down on the next $1,000,000 or $100,000,
• For a required minimum downpayment of $125,000. That’s $175,000 less than the $300,000 needed at 20% down.

How This Affects Niagara

The regional benchmark price in Niagara as of October is $638,500, a far cry from the new cap. Yet this change will have a positive effect on buying, as it will apply to all buyers and not just first-time buyers.

• 5% down on the first $500,000 or $25,000,

• 10% down on the remaining amount of $138,500 or $13,850,
• For a minimum downpayment of $38,850. That is $88,650 less than the $127,700 needed at 20% down.

To reiterate, this December 14th ruling applies to all buyers that don’t have 20% down. Yes, there is a mortgage insurance charge added to the mortgage but it gets a buyer into home ownership and on the road to building wealth through equity growth over time.

Changes to Amortization on Insured Mortgages

As of August, first-time buyers have been eligible for 30-year amortizations on insured mortgages for the purchase of a brand new home. As of December 15th,

• First-time home buyers can get an insured 30-year amortization on the purchase of either a new or previously occupied home, and
• All buyers can get a 30-year amortized mortgage on new builds.

Much-Improved Access to Buying

The changes offer much-improved access to buying for first-time buyers and, yes, even 2nd time buyers and beyond.

But there are downsides.

For instance, a 30-year mortgage will lower the monthly payment but will result in more interest being paid over the life of the mortgage. This could be countered if people take advantage of pre-payment privileges offered in their mortgage. Moreover, it opens the door to more buyer competition potentially increasing home prices. The large inventory of home listings will tone down that possibility.

Can you switch to another lender if your mortgage is up for renewal? Until November 19th, 2024, that depended on the type of mortgage you have. If you have an insured mortgage, yes you can shop around and move to another lender without having to undergo the mortgage stress test. Read on.

About the Stress Test

Under the mortgage stress test, to qualify for a mortgage, a borrower is required to qualify at the interest rate of 5.25% or the contract rate plus 2 points, whichever is greater. So with a mortgage of 4.50%, the borrower’s affordability is based on the higher rate of 6.50%. That is 4.50% plus 2%.

An Uninsured Mortgage Has Required a Stress Test

However, if you have an uninsured mortgage and want to switch lenders you are subject to the stress test. That is, you are treated the same as an individual applying for a mortgage on a home purchase, not a renewal. The only way to avoid the stress test is to stay with your existing lender, a disadvantage compared to people whose mortgages are insured. You worked hard to avoid the added insurance cost on your mortgage when you purchased your home by having a downpayment of at least 20% if not more of the purchase price. Yet on renewal, you do not have the privilege of shopping around without being subjected to the stress test–no more.

Now There Is Flexibility to Switch Between Federally Regulated Lenders

As of November 20th, 2024, uninsured mortgage renewals are no longer subject to the stress test if you switch from one federally regulated lender to another. Though it removes some of the imbalance, it does not apply to provincially regulated credit unions and mortgage finance companies. According to canadianmortgagetrends.com, “The move by OSFI is seen as a win for mortgage borrowers, offering more flexibility to switch lenders in search of better rates or more favourable terms. It also comes at a critical time for Canadian homeowners, with roughly 70% of all outstanding mortgages expected to come up for renewal by the end of 2026.”

It is Though a Straight Switch

The elimination of this rule applies if you are not increasing your loan amount or the amortization. This should create competition among lenders and better rates and terms. The next great step is to eliminate the stress test entirely.

Source: Canadian Mortgage Trends, written by Steve Huebl.