proved through increasing the supply of available homes rather than implementing measures such as extending mortgage amortizations and changing eligibility thresholds for insured mortgages. According to the head of the Canadian housing agency, Romy Bowers, these measures may make credit more accessible and reduce monthly payments, but they ultimately increase the cost to homeowners over time.
Under current Canadian lending regulations, borrowers must repay their mortgage over a maximum of 25 years if their down payment is less than 20% of the purchase price of the home. However, borrowers with a down payment of at least 20% can benefit from a maximum amortization period of 30 years. Proponents of longer amortization periods argue that they provide borrowers with more flexibility and help them balance their monthly budgets. However, critics argue that longer amortization periods result in higher interest costs over the life of the mortgage, slowing down the accumulation of home equity.
Bowers expressed concern that extending amortizations may seem like a quick fix, but it will not solve the long-term problem of housing affordability, especially in markets with limited supply. She emphasized the need to increase the supply of available homes to develop a more balanced market and offer homes at different price points, reducing the burden of mortgage debt on individuals.
Bowers cited the example of the UK, where the government introduced a scheme that provided generous grants for down payments to first-time homebuyers in London. However, when the program was evaluated, it was found that starter home prices had risen by the exact amount of the government subsidy, negating any affordability gains. Similarly, Bowers argued that extending the amortization period would drive up property prices, making it an ineffective solution.
The housing market in Canada experienced a surge in demand at the beginning of 2023, followed by a slowdown as borrowing costs increased. However, Canadians have started to re-engage with the housing market, leading to a rise in prices once again. The Canadian Real Estate Association reported that the real national average house price reached 9,044 in May, up 3.2% from the previous year. The average price in the Greater Toronto Area and parts of British Columbia exceeded $1 million.
Bowers, who became the head of CMHC in April 2021, believes that improving affordability requires a focus on increasing the supply of available homes rather than implementing measures that may have unintended consequences. By developing a more balanced market with homes at different price points, the burden of mortgage debt can be reduced, making homeownership more accessible for Canadians.s=”textModule textModule–type-body”>The CEO of the Canadian housing agency, in a recent statement, expressed his views on the housing affordability problems in the country. He stated that measures such as extending mortgage amortizations and changing the eligibility threshold for an insured
factors affecting demand and supply in the housing market a study on three major cities in turkey
Cially in high-demand markets. Instead, he suggests focusing on increasing the supply of available homes as a more sustainable solution.
Increasing the supply of available homes would address the root cause of housing affordability issues. By building more affordable housing units and encouraging the construction of new homes, the market would become more balanced, leading to stabilized prices and increased options for potential homeowners. This would directly benefit individuals and families looking to enter the housing market or upgrade to a larger home.
Implementing measures to encourage the construction of more homes could include streamlining the approval process for new housing developments, providing incentives to builders, and investing in infrastructure to support residential growth. These initiatives would not only create more housing options but also stimulate economic activity and job growth in the construction sector.
Bowers also highlights the importance of tackling other factors that contribute to housing affordability, such as excessive speculation and foreign investment in the real estate market. Addressing these issues could help prevent rapid price increases and ensure that housing remains accessible to Canadian residents.
In conclusion, while extending mortgage amortizations and changing eligibility thresholds may provide short-term relief in terms of credit accessibility and lower monthly payments, they do not address the underlying issue of housing affordability. To achieve long-term affordability, it is crucial to focus on increasing the supply of available homes through various measures and addressing other factors that influence housing prices.
While it may seem like an easy fix, extending mortgage amortizations is not the ultimate solution to housing affordability in Canada. A well-rounded approach addressing other factors such as supply and demand dynamics and exploring affordable housing options would be more effective in tackling this issue.
While extending mortgage amortizations may provide short-term relief, it is not a sustainable solution to housing affordability in Canada. It is crucial to address the root causes of the issue and implement long-term strategies that promote affordable housing options for all Canadians.