With new mortgage rules just two months away, experts warn of mixed effects for Canada’s supply crisis

• New mortgage rules take effect on December 15, aiming to make homeownership more accessible in high-cost cities
• Buyers in high-end markets like Toronto and Vancouver will benefit most from the changes, which allow for mortgages with smaller down payments
• Experts warn that the ongoing housing supply shortage may lead to increased competition and even higher prices despite the new rules

Two months away: The mortgage rule changes are now officially two months away. The new cap is set to take effect on December 15, and aims to make homeownership more accessible, especially in high-cost cities like Toronto and Vancouver. But experts warn that the changes may have mixed effects, particularly given the country's ongoing housing supply challenges.

Who wins: Buyers in high-cost markets like expected to benefit the most. The new rule allows buyers to qualify for mortgages with less than a 20% down payment. However, the impact will vary depending on location, said Eitan Pinsky, mortgage broker and owner of Pinsky Mortgages. "There are two markets in Canada—big cities like Toronto and Vancouver, and the rest of Canada," he said, adding that in smaller communities, very few homes exceed $1 million, so this won’t have much impact there.

For homebuyers in cities like Toronto, the increased cap could be a game-changer, making homes that were previously out of reach more affordable. According to Pinsky, this is especially helpful for dual-income professionals who can now qualify for higher-value properties without needing to save for a large down payment.

A boost for first-timers: Another significant change is the extension of 30-year amortization periods to include both new and resale homes. The move is aimed at making it easier for buyers to qualify for larger mortgages by spreading out payments over a longer period.

According to Marcel Brossart, founder of Your Mortgage Plus, the new rule could open the door to homeownership for people who were previously unable to qualify, but there is a catch. "The issue at hand is that there is a shortage of homes for sale and by bringing in new increased qualified purchasers, the government may be just adding 'fuel to the fire' as this could now increase the purchase price of entry-level homes due to supply and demand," he said.

Pinsky echoed this concern, noting that the shortage of family-sized homes is already a major issue, especially in high-demand markets like Vancouver. "We have a supply issue of properties where families can live. You don't see very many developers being incentivized to build three to four bedroom condos because they make the most amount of money on one and two bedroom condos," he said.

The bottom line: Canada’s new mortgage rules are designed to give more people access to homeownership in high-cost markets, but they may also lead to increased competition and higher prices. While the changes offer immediate benefits to some buyers, the broader issue of housing supply remains unsolved. As the rules take effect, buyers should be prepared for both new opportunities and added challenges in a competitive market.