Trudeau eases mortgage rules in bid to lure younger voters

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(Bloomberg) — Prime Minister Justin Trudeau’s government will make 30-year mortgages available to all first-home buyers and buyers of new construction homes as the embattled leader tries to win back the approval of younger Canadians.

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The government will also allow mortgage default insurance on homes worth up to C$1.5 million ($1.1 million), up from the current C$1 million limit. That means buyers can bid on more expensive homes even if they put less than a 20% down — as long as they buy insurance.

“We are now introducing the boldest mortgage reforms in decades to make homeownership a reality for younger Canadians,” Finance Minister Chrystia Freeland said in a press release. The measures will go into effect on Dec. 15.

Canada took tough action against long-term mortgage payments during the 2008 global financial crisis. Until this year, buyers who needed government-backed default insurance on their mortgages were limited to 25-year payments.

Trudeau and Freeland took a step in April to relax this rule, making it possible to pay off a mortgage with mortgage insurance only if it is the first time that a new home is purchased.

Monday’s announcement will significantly expand the pool of buyers who can access 30-year loans, which significantly lower monthly payments. Insured first-time homebuyers represent about 20% of the market in Canada, while new construction accounts for about 4%, Freeland said.

Freeland noted that the insured mortgage limit had not been adjusted since 2012. Home prices in Canada have doubled since then, with the average price in August reaching C$1.1 million in Toronto and C$1.3 million in Vancouver.

She pushed back against reporters’ questions about whether the measures would boost the housing market and saddle younger Canadians with more debt. She said the government has also proposed initiatives to increase supply, including funding to encourage municipalities to allow denser zoning and cutting red tape.

“What this is about is making the dream of home ownership accessible to younger Canadians, and giving first-home buyers a head start in the housing market,” she said.

Canadian home sales data in August showed a pick-up in market activity after the central bank cut interest rates twice in a row in June and July.

The number of new listings rose 1.1% in August from a month earlier and the total number of homes for sale stood at 177,450 at the end of August, an increase of almost 19% from a year earlier.

Both Trudeau and Freeland have made housing a central part of their economic message this year, promising a raft of programs to boost construction and provide easier access to financing. But so far, those moves have done little to improve Trudeau’s standing in public opinion polls.

Elections are scheduled for October 2025, but they could happen any time next year, especially after Trudeau’s ally in parliament pulled out of a power-sharing deal earlier this month.

If elections were held today, Pierre Poilievre’s Conservative Party would very likely win a majority government in parliament, given its large lead in the polls.

Voters in a Montreal district cast their ballots Monday to fill a vacant seat long held by Trudeau’s Liberals, in a special election widely seen as a referendum on his leadership.

–With assistance from Erik Hertzberg.

(Adds quotes from the press conference, background information begins in paragraph eight.)

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