Regulations Amending the Insurable Housing Loan Regulations and the Eligible Mortgage Loan Regulations: SOR/2025-55

Canada Gazette, Part II, Volume 159, Number 6

Registration
SOR/2025-55 March 12, 2025

NATIONAL HOUSING ACT
PROTECTION OF RESIDENTIAL MORTGAGE OR HYPOTHECARY INSURANCE ACT

The Minister of Finance, having consulted the Governor of the Bank of Canada and the Superintendent of Financial Institutions, makes the annexed Regulations Amending the Insurable Housing Loan Regulations and the Eligible Mortgage Loan Regulations under

• (a) section 8.1^{footnote a} of the National Housing Act ^{footnote b}; and
• (b) section 42^{footnote c} of the Protection of Residential Mortgage or Hypothecary Insurance Act ^{footnote d}.

Ottawa, February 24, 2025

Dominic LeBlanc
Minister of Finance

Regulations Amending the Insurable Housing Loan Regulations and the Eligible Mortgage Loan Regulations

National Housing Act

Insurable Housing Loan Regulations

1 (1) Subsection 1(1) of the Insurable Housing Loan Regulations ^{footnote 1} is amended by adding the following in alphabetical order:

first-time home buyer

means an individual who, at the time of purchasing an eligible residential property,

• (a) has never before purchased an eligible residential property in Canada;
• (b) has not, in the calendar year in question or at any time in the four preceding calendar years, occupied as a principal place of residence an eligible residential property in Canada that was owned, whether jointly with another person or otherwise, by
  • (i) the individual, or
  • (ii) their current spouse or common-law partner; or
• (c) is an individual who
  • (i) is living separate and apart from their spouse or common-law partner because of a breakdown of their marriage or common-law partnership,
  • (ii) has been living separate and apart from their spouse or common-law partner for a period of at least 90 days, and
  • (iii) began living separate and apart from their spouse or common-law partner in the calendar year in question or at any time in the four preceding calendar years. (acheteur d’une première habitation)

newly built,

in respect of an eligible residential property, means that

• (a) the property has never been occupied for residential purposes; or
• (b) in the case of a condominium unit or a private portion of a divided co-ownership, the property has never been occupied for residential purposes other than during a period in which the borrower assumed occupancy on an interim basis before the registration of the condominium declaration or declaration of co-ownership or before taking possession. (nouvellement construit)

(2) Subsection 1(1) of the Regulations is amended by adding the following in alphabetical order:

loan for the addition of family housing units

means a housing loan that is secured by an eligible residential property, whose purpose is the improvement, conversion or development of the eligible residential property to increase the number of family housing units that it contains and whose only other purpose may be the discharge of the outstanding balance of a prior loan against the property. (prêt pour l’ajout de logements familiaux)

2 Subsection 3(1) of the Regulations is replaced by the following:

Insurability

3 (1) Subject to subsections (4) to (6), a housing loan must meet the criteria set out in section 4 and, as applicable, section 5, 6 or 6.1 for the Corporation to be able to provide insurance against risks relating to it.

3 (1) Paragraph 5(1)(c) of the Regulations is replaced by the following:

• (c) subject to subsection (1.1), the loan must be scheduled to amortize over a period that does not exceed 25 years;

(2) Paragraph 5(1)(d) of the Regulations is replaced by the following:

• (d) the value of the eligible residential property against which the loan is secured must be less than $1,500,000;

(3) Section 5 of the Regulations is amended by adding the following after subsection (1):

Amortization period not exceeding 30 years

(1.1) The loan may be scheduled to amortize over a period that exceeds 25 years, but does not exceed 30 years, if any of the borrowers is a first-time home buyer, if the eligible residential property against which the loan is secured is newly built and if the housing loan insurance application in respect of the loan is received on or after August 1, 2024.

(4) Subsection 5(1.1) of the Regulations is replaced by the following:

Amortization period not exceeding 30 years

(1.1) The loan may be scheduled to amortize over a period that exceeds 25 years, but does not exceed 30 years, if any of the borrowers is a first-time home buyer or if the eligible residential property against which the loan is secured is newly built.

(5) Paragraphs 5(3)(a) and (b) of the Regulations are replaced by the following:

• (a) the interest rate set out in the loan agreement plus 2%, and
• (b) 5.25%.

4 (1) Paragraph 6(1)(h) of the English version of the Regulations is replaced by the following:

• (h) at either the time of the initial approval of the loan by an approved lender or discharge of the outstanding balance of a prior low ratio loan by the approved lender, the value of the eligible residential property against which it is insured must be less than $1,000,000;

(2) Paragraph 6(1)(k) of the English version of the Regulations is replaced by the following:

• (k) at the time of the approved lender’s initial approval of the loan or discharge of the outstanding balance of a prior low ratio loan, as the case may be, the gross debt service ratio and total debt service ratio must not exceed 39% and 44%, respectively;

(3) Paragraph 6(1)(l) of the Regulations is replaced by the following:

• (l) at the time of the approved lender’s initial approval of the loan or discharge of the outstanding balance of a prior low ratio loan, as the case may be, if the eligible residential property against which the loan is secured contains only one family housing unit, that unit will be occupied by the borrower or by a person related to them by marriage, common-law partnership or any legal parent-child relationship; and

(4) Paragraphs 6(3)(a) and (b) of the Regulations are replaced by the following:

• (a) the interest rate set out in the loan agreement plus 2%, and
• (b) 5.25%.

(5) Section 6 of the Regulations is amended by adding the following after subsection (3):

Debt service ratio exception

(3.1) The criterion specified in paragraph (1)(k) does not apply if

• (a) the loan is for the discharge of the outstanding balance of a prior low ratio loan;
• (b) the lender of the loan being discharged is a bank to which the Bank Act applies, an association to which the Cooperative Credit Associations Act applies or a company to which the Insurance Companies Act or the Trust and Loan Companies Act applies; and
• (c) the housing loan insurance application in respect of the loan is received on or after December 16, 2024.

5 The Regulations are amended by adding the following after section 6:

Loan for the addition of family housing units

6.1 (1) A loan for the addition of family housing units may meet the following criteria instead of those set out in section 5 or 6:

• (a) at the time the loan is approved, the borrower must be the owner of the eligible residential property against which the loan is secured;
• (b) at the time the loan is approved, its principal amount, together with the outstanding balance of any loan having an equal or prior claim against the eligible residential property against which the loan is secured, must be less than or equal to 90% of the estimated value of the eligible residential property after the completion of the improvement, conversion or development that will increase the number of family housing units;
• (c) the portion of the principal amount of the loan that exceeds the outstanding balance, at the time the loan is approved, of any prior loan against the eligible residential property must not exceed the estimated cost to the borrower of the improvement, conversion or development that will increase the number of family housing units;
• (d) the added family housing units must not be rented for any period of less than 90 consecutive days;
• (e) the loan must be scheduled to amortize over a period that does not exceed 30 years;
• (f) the estimated value of the eligible residential property against which the loan is secured, after the completion of the improvement, conversion or development that will increase the number of family housing units, must be less than $2,000,000;
• (g) the eligible residential property against which the loan is secured must contain at least one family housing unit that, at the time the loan is approved, is occupied by the borrower or by a person related to them by marriage, common-law partnership or any legal parent-child relationship and at least one family housing unit that will be occupied as such after the completion of the improvement, conversion or development;
• (h) if the loan agreement allows for fluctuations in the amortization period as a result of a variable rate of interest during the term of the loan, the loan payment must be recalculated at least once every five years to conform to the original amortization schedule;
• (i) the loan agreement must establish scheduled principal and interest payments that will begin reducing the outstanding principal in accordance with the overall amortization schedule agreed to at the making of the loan, commencing on
  • (i) the day on which the loan is last funded, or
  • (ii) the day on which the improvement, conversion or development of the eligible residential property is completed;
• (j) at the time the loan is approved, at least one of its borrowers or guarantors must have a credit score that is greater than or equal to 600;
• (k) at the time the loan is approved, the gross debt service ratio and the total debt service ratio must not exceed 39% and 44%, respectively;
• (l) at the time the loan is approved, it must be reasonably likely to be repaid, having regard to the borrower’s capacity to make the loan payments while paying their other debts and meeting their other obligations over the term of the loan, based on reasonable assumptions as to what the highest loan payment over the term of the loan will be; and
• (m) if the loan is part of a pool of loans on the direct basis of which marketable securities are issued, those securities must be guaranteed under subsection 14(1) of the Act.

Credit score exception

(2) The criterion set out in paragraph (1)(j) does not apply if no more than 3% of the lender’s high ratio loans and low ratio loans that were approved for insurance and funded during one of the following periods were loans in respect of which no borrower or guarantor had a credit score of at least 600:

• (a) the first four quarters of the preceding five quarters;
• (b) the first four quarters of the preceding six quarters; or
• (c) the first four quarters of the preceding seven quarters.

Debt service ratio calculations

(3) For the purposes of paragraph (1)(k), the gross debt service ratio and total debt service ratio are to be calculated using the annual payments, in respect of the loan and any other loan with an equal or prior claim against the eligible residential property, that would be required to conform to the amortization schedule agreed to by the borrower and the lender if the interest rate were the greater of

• (a) the interest rate set out in the loan agreement plus 2%, and
• (b) 5.25%.

Reasonable likelihood of repayment

(4) A loan does not meet the criterion set out in paragraph (1)(l) unless the lender or the Corporation has made reasonable efforts to verify the borrower’s income and employment status or, if the borrower is self-employed, to assess the plausibility of the income reported by the borrower.

Non-application — applications before January 15, 2025

(5) This section applies only to loans in respect of which the housing loan insurance application is received on or after January 15, 2025.

6 The Regulations are amended by adding the following after section 9:

Before June 1, 2021

10 A high ratio loan or low ratio loan is to be governed by these Regulations as they read on May 31, 2021 if, on any day before June 1, 2021,

• (a) the Corporation received a housing loan insurance application in respect of the loan;
• (b) the lender made a legally binding commitment to make the loan to the borrower; or
• (c) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured.

7 The Regulations are amended by adding the following after section 10:

High ratio loans — August 1, 2024 to December 14, 2024

11 A high ratio loan is to be governed by these Regulations as they read on December 14, 2024 if the housing loan insurance application in respect of the loan was received on or after August 1, 2024 but before December 15, 2024.

Protection of Residential Mortgage or Hypothecary Insurance Act

Eligible Mortgage Loan Regulations

8 (1) Subsection 1(1) of the Eligible Mortgage Loan Regulations ^{footnote 2} is amended by adding the following in alphabetical order:

first-time home buyer

means an individual who, at the time of purchasing an eligible residential property,

• (a) has never before purchased an eligible residential property in Canada;
• (b) has not, in the calendar year in question or at any time in the four preceding calendar years, occupied as a principal place of residence an eligible residential property in Canada that was owned, whether jointly with another person or otherwise, by
  • (i) the individual, or
  • (ii) their current spouse or common-law partner; or
• (c) is an individual who
  • (i) is living separate and apart from their spouse or common-law partner because of a breakdown of their marriage or common-law partnership,
  • (ii) has been living separate and apart from their spouse or common-law partner for a period of at least 90 days, and
  • (iii) began living separate and apart from their spouse or common-law partner in the calendar year in question or at any time in the four preceding calendar years. (acheteur d’une première habitation)

newly built,

in respect of an eligible residential property, means that

• (a) the property has never been occupied for residential purposes; or
• (b) in the case of a condominium unit or a private portion of a divided co-ownership, the property has never been occupied for residential purposes other than during a period in which the borrower assumed occupancy on an interim basis before the registration of the condominium declaration or declaration of co-ownership or before taking possession. (nouvellement construit)

(2) Subsection 1(1) of the Regulations is amended by adding the following in alphabetical order:

loan for the addition of housing units

means a mortgage or hypothecary loan that is secured by an eligible residential property, whose purpose is the improvement, conversion or development of the eligible residential property to increase the number of housing units that it contains and whose only other purpose may be the discharge of the outstanding balance of a prior loan against the property. (prêt pour l’ajout d’unités de logement)

9 Subsection 3(1) of the Regulations is replaced by the following:

Eligibility

3 (1) Subject to subsections (4) and (5), to be an eligible mortgage loan, a mortgage or hypothecary loan must meet the criteria set out in section 4 and, as applicable, section 5, 6 or 6.1.

10 (1) Paragraph 5(1)(c) of the Regulations is replaced by the following:

• (c) subject to subsection (1.1), the loan must be scheduled to amortize over a period that does not exceed 25 years;

(2) Paragraph 5(1)(d) of the Regulations is replaced by the following:

• (d) the value of the eligible residential property against which the loan is secured must be less than $1,500,000;

(3) Section 5 of the Regulations is amended by adding the following after subsection (1):

Amortization period not exceeding 30 years

(1.1) The loan may be scheduled to amortize over a period that exceeds 25 years, but does not exceed 30 years, if any of the borrowers is a first-time home buyer, if the eligible residential property against which the loan is secured is newly built and if the mortgage or hypothecary insurance application in respect of the loan is received on or after August 1, 2024.

(4) Subsection 5(1.1) of the Regulations is replaced by the following:

Amortization period not exceeding 30 years

(1.1) The loan may be scheduled to amortize over a period that exceeds 25 years, but does not exceed 30 years, if any of the borrowers is a first-time home buyer or if the eligible residential property against which the loan is secured is newly built.

(5) Paragraphs 5(3)(a) and (b) of the Regulations are replaced by the following:

• (a) the interest rate set out in the loan agreement plus 2%, and
• (b) 5.25%.

11 (1) Paragraphs 6(3)(a) and (b) of the Regulations are replaced by the following:

• (a) the interest rate set out in the loan agreement plus 2%, and
• (b) 5.25%.

(2) Section 6 of the Regulations is amended by adding the following after subsection (3):

Debt service ratio exception

(3.1) The criterion specified in paragraph (1)(k) does not apply if

• (a) the loan is for the discharge of the outstanding balance of a prior low ratio loan;
• (b) the lender of the loan being discharged is a bank to which the Bank Act applies, an association to which the Cooperative Credit Associations Act applies or a company to which the Insurance Companies Act or the Trust and Loan Companies Act applies; and
• (c) the mortgage or hypothecary insurance application in respect of the loan is received on or after December 16, 2024.

12 The Regulations are amended by adding the following after section 6:

Loan for the addition of housing units

6.1 (1) A loan for the addition of housing units may meet the following criteria instead of those set out in section 5 or 6:

• (a) at the time the loan is approved, the borrower must be the owner of the eligible residential property against which the loan is secured;
• (b) at the time the loan is approved, its principal amount, together with the outstanding balance of any loan having an equal or prior claim against the eligible residential property against which the loan is secured, must be less than or equal to 90% of the estimated value of the eligible residential property after the completion of the improvement, conversion or development that will increase the number of housing units;
• (c) the portion of the principal amount of the loan that exceeds the outstanding balance, at the time the loan is approved, of any prior loan against the eligible residential property must not exceed the estimated cost to the borrower of the improvement, conversion or development that will increase the number of housing units;
• (d) the added housing units must not be rented for any period of less than 90 consecutive days;
• (e) the loan must be scheduled to amortize over a period that does not exceed 30 years;
• (f) the estimated value of the eligible residential property against which the loan is secured, after the completion of the improvement, conversion or development that will increase the number of housing units, must be less than $2,000,000;
• (g) the eligible residential property against which the loan is secured must contain at least one housing unit that, at the time the loan is approved, is occupied by the borrower or by a person related to them by marriage, common-law partnership or any legal parent-child relationship and at least one housing unit that will be occupied as such after the completion of the improvement, conversion or development;
• (h) if the loan agreement allows for fluctuations in the amortization period as a result of a variable rate of interest during the term of the loan, the loan payment must be recalculated at least once every five years to conform to the original amortization schedule;
• (i) the loan agreement must establish scheduled principal and interest payments that will begin reducing the outstanding principal in accordance with the overall amortization schedule agreed to at the making of the loan, commencing on
  • (i) the day on which the loan is last funded, or
  • (ii) the day on which the improvement, conversion or development of the eligible residential property is completed;
• (j) at the time the loan is approved, at least one of its borrowers or guarantors must have a credit score that is greater than or equal to 600;
• (k) at the time the loan is approved, the gross debt service ratio and total debt service ratio must not exceed 39% and 44%, respectively;
• (l) at the time the loan is approved, it must be reasonably likely to be repaid, having regard to the borrower’s capacity to make the loan payments while paying their other debts and meeting their other obligations over the term of the loan, based on reasonable assumptions as to what the highest loan payment over the term of the loan will be; and
• (m) if the loan is part of a pool of loans on the direct basis of which marketable securities are issued, those securities must be guaranteed under subsection 14(1) of the National Housing Act.

Credit score exception

(2) The criterion set out in paragraph (1)(j) does not apply if no more than 3% of the lender’s high ratio loans and low ratio loans that were approved for insurance and funded during one of the following periods were loans in respect of which no borrower or guarantor had a credit score of at least 600:

• (a) the first four quarters of the preceding five quarters;
• (b) the first four quarters of the preceding six quarters; or
• (c) the first four quarters of the preceding seven quarters.

Debt service ratio calculations

(3) For the purposes of paragraph (1)(k), the gross debt service ratio and total debt service ratio are to be calculated using the annual payments, in respect of the loan and any other loan with an equal or prior claim against the eligible residential property, that would be required to conform to the amortization schedule agreed to by the borrower and the lender if the interest rate were the greater of

• (a) the interest rate set out in the loan agreement plus 2%, and
• (b) 5.25%.

Reasonable likelihood of repayment

(4) A loan does not meet the criterion set out in paragraph (1)(l) unless the mortgage or hypothecary lender or mortgage insurer has made reasonable efforts to verify the borrower’s income and employment status or, if the borrower is self-employed, to assess the plausibility of the income reported by the borrower.

Non-application — applications before January 15, 2025

(5) This section applies only to loans in respect of which the mortgage or hypothecary insurance application is received on or after January 15, 2025.

13 The Regulations are amended by adding the following after section 9:

Before June 1, 2021

10 A high ratio loan or low ratio loan is to be governed by these Regulations as they read on May 31, 2021 if, on any day before June 1, 2021,

• (a) the mortgage insurer received a mortgage or hypothecary insurance application in respect of the loan;
• (b) the lender made a legally binding commitment to make the loan to the borrower; or
• (c) the borrower entered into a legally binding agreement of purchase and sale in respect of the eligible residential property against which the loan is secured.

14 The Regulations are amended by adding the following after section 10:

High ratio loans — August 1, 2024 to December 14, 2024

11 A high ratio loan is to be governed by these Regulations as they read on December 14, 2024 if the mortgage or hypothecary insurance application in respect of the loan was received on or after August 1, 2024 but before December 15, 2024.

Coming into Force

15 (1) Subject to subsections (2) to (6), these Regulations come into force on the day on which they are registered.

(2) Subsections 1(1), 3(1) and (3), 8(1) and 10(1) and (3) are deemed to have come into force on August 1, 2024.

(3) Subsection 1(2), sections 2 and 5, subsection 8(2) and sections 9 and 12 are deemed to have come into force on January 15, 2025.

(4) Subsections 3(2) and (4), section 7, subsections 10(2) and (4) and section 14 are deemed to have come into force on December 15, 2024.

(5) Subsections 3(5) and 4(4), section 6, subsections 10(5) and 11(1) and section 13 are deemed to have come into force on June 1, 2021.

(6) Subsections 4(5) and 11(2) are deemed to have come into force on December 16, 2024.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

In 2024, the government announced several amendments to the Eligible Mortgage Loan Regulations and the Insurable Housing Loan Regulations (the mortgage insurance rules). Pursuant to the Protection of Residential Mortgage or Hypothecary Insurance Act and the National Housing Act, under which the Minister of Finance makes these regulations, the regulations can be made retroactive to the date on which the related changes were announced by the government as being effective. In addition to the regulatory changes that the government announced in 2024, the government also implemented changes in 2021 that the Minister of Finance is required to formalize.

These regulations to amend the mortgage insurance rules formalize the following measures that the government previously announced and which are already being carried out by industry as of the effective dates announced by the government:

• On May 20, 2021, the Minister of Finance announced that the Government of Canada would align with the Office of the Superintendent of Financial Institutions (OSFI) by establishing a new minimum qualifying rate (MQR) for insured mortgages, subject to review and periodic adjustment. This rate is the greater of the borrower’s mortgage contract rate plus 2 per cent, or 5.25 per cent, applying to insured mortgages approved on or after June 1, 2021.
• Budget 2024 announced that the government is strengthening the Canadian Mortgage Charter to allow 30-year amortizations for insured mortgages for first-time home buyers purchasing new builds, effective August 1, 2024. On June 11, 2024, the government published a technical backgrounder outlining eligibility parameters.
• On September 16, 2024, the Minister of Finance announced a suite of reforms to mortgage insurance rules effective December 15, 2024, to (1) increase the $1 million home price limit for high ratio insured mortgages to $1.5 million and (2) expand eligibility for 30-year mortgage amortizations to all first-time homebuyers and to all buyers of new builds. On September 24, 2024, the government published a technical backgrounder outlining eligibility parameters.
• Budget 2024 announced that the government would make targeted changes to mortgage insurance rules to enable homeowners to add more units to their homes. On October 8, 2024, the government published a technical backgrounder to (1) allow refinancing of insured mortgages for secondary suites and (2) increase the mortgage insurance home price limit to $2 million for those refinancing to build secondary suites, effective January 15, 2025.
• The 2024 Fall Economic Statement announced that the government is amending the mortgage insurance rules to remove the MQR requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance for the mortgage. On December 16, 2024, the government published a technical backgrounder outlining the parameters for this measure, which is effective on that date.

Background

The Minister of Finance sets eligibility rules for federally backed mortgage insurance, which include the minimum down payment, the maximum amortization period, and the property value limit. These rules balance access to mortgage credit and household indebtedness risks. These rules also manage access to the government’s guarantee of mortgage insurance while limiting taxpayer exposure to the housing market. Mortgage insurance eligibility rules are set out in Ministerial regulations. Changes to these rules require consultation with the Superintendent of Financial Institutions and the Governor of the Bank of Canada.

Objective

All the changes to mortgage insurance rules listed below are already being implemented by industry as of the effective dates announced by the government. These regulatory amendments are formalizing these changes within the regulations, as permitted by the statutory instruments. Specifically, subsection 42(3) of PRMHIA and subsection 8.1(3) of the NHA permit the regulations to come into effect retroactively to the date the Minister announced the regulatory parameters. Therefore, for greater clarity, there are no additional changes to mortgage insurance rules; these regulatory amendments are formalizing changes that the Minister of Finance previously announced.

The MQR for insured mortgages provides a buffer to help protect borrowers against rising interest rates, disruptions to household income, or unforeseen household expenses. In turn, this helps mitigate against rising household debt vulnerabilities. Alignment between the minimum qualifying rate for insured mortgages and uninsured mortgages provides industry with greater regulatory certainty and consistency, while strengthening overall market integrity.

The introduction of 30-year amortizations for insured mortgages for first-time home buyers purchasing new builds supported access to homeownership by enabling more Canadians to purchase homes with reduced monthly mortgage payments and encouraging new supply. To avoid inducing housing demand, this measure was initially designed to only apply to first-time homebuyers purchasing new builds.

The extension of 30-year amortizations for insured mortgages, to all first-time homebuyers and all buyers of new builds, supports access to homeownership by enabling more Canadians to purchase homes with lower monthly mortgage payments.

Raising the mortgage insurance home price limit from $1 million to $1.5 million supports the efficient functioning of the housing market by updating mortgage insurance criteria to better reflect current market conditions and by helping more Canadians purchase homes with lower downpayments, especially in markets where median house prices exceed $1 million.

Allowing insured mortgage refinancing for secondary suites and increasing the mortgage insurance limit to $2 million for those building secondary suites, will support the creation of additional housing units and expand Canada’s housing supply. The new secondary suite rule is intended to apply to both low and high-ratio mortgages, ensuring broad access to this product.

Removing the MQR requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance for the mortgage supports homeowners with mortgages that are renewing to be able to shop around for a better rate. This change also aligns mortgage insurance rules with the Office of the Superintendent of Financial Institutions’ (OSFI) guidance.

Description

Minimum Qualifying Rate for Insured Mortgages

The amendments establish a new formulation for the minimum qualifying rate for insured mortgages, which is the greater of the borrower’s mortgage contract rate plus a 2 per cent buffer, or a 5.25 per cent floor rate. Lenders are required to calculate a borrower’s debt service ratios (DSRs) using this new minimum qualifying rate. For example, the regulations require that the borrower’s gross debt service ratio does not exceed a maximum of 39 per cent. Previously, a borrower’s DSRs were computed using the minimum qualifying rate determined as the greater of the borrower’s mortgage contract rate and the five-year conventional mortgage interest rate, as determined weekly by the Bank of Canada. However, with the changes announced by the Minister in 2021, lenders must use the new minimum qualifying rate for DSR calculations.

Mortgage insurers have been applying the 2021 Minimum Qualifying Rate since its coming into force date on June 1, 2021. These regulatory amendments are formalizing this requirement within the regulations, as permitted by legislation. Specifically, subsection 42(3) of PRMHIA and subsection 8.1(3) of the NHA permit the regulations to come into effect retroactively to the announcement date. Therefore, for greater clarity, there is no change to the current Minimum Qualifying Rate for insured mortgages; these regulatory amendments are only codifying the existing requirements.

30 Year Amortizations for all First-Time Home Buyers and all Purchasers of New Builds

The amendments set out the following eligibility criteria for borrowers to be able to access up to 30-year mortgage amortizations:

• First-Time Homebuyer: At least one of the borrowers on an application must be a first-time homebuyer. To be considered a first-time homebuyer, a borrower must meet one of the following criteria:
  • The borrower has never purchased a home before;
  • In the last 4 years, the borrower has not occupied a home as a principal place of residence that either they themselves or their current spouse or common-law partner owned; or,
  • The borrower recently experienced the breakdown of a marriage or common-law partnership. On this point, the amendments follow the approach that the Canada Revenue Agency has taken with respect to the Home Buyers’ Plan.
• Newly Constructed Home: The property that the borrower is purchasing must be a newly constructed home. To be considered a newly constructed home, the new home must not have been previously occupied for residential purposes. This requirement is not intended to exclude newly constructed condominiums where there has been an interim occupancy period.
• This measure will only apply to high-ratio mortgages (mortgages where the loan amount exceeds 80 per cent of the home price) on owner-occupied properties.

Amendments permitting 30-year amortizations for first-time homebuyers purchasing new builds are effective August 1, 2024, and amendments permitting 30-year amortizations for all first-time homebuyers and all purchasers of new builds supersede the previous amendments and are effective December 15, 2024.

Increasing the $1 million Home Price Limit for Insured Mortgages to $1.5 million

These amendments apply to all borrowers requiring high loan to value mortgage insurance in Canada, effective December 15, 2024, and must satisfy the following requirements:

• The total loan to value is greater than 80 per cent;
• The value of the eligible residential property against which the loan is secured must be less than $1.5 million; and,
• The downpayment requirements for the loan are as follows:
  • 5 per cent on the portion of a purchase price up to $500,000.
  • 10 per cent on the portion of a purchase price between $500,000 and $1.5 million.

Secondary Suites

The amendments set out the following eligibility criteria, effective January 15, 2025, for borrowers seeking to access mortgage insurance in Canada to add more units (secondary suites):

• The borrowers must satisfy the following requirements:
  • Already own their properties;
  • The borrower or a close relative are occupying one of the current units;
  • Intend to construct additional units; and,
  • The additional unit(s) must not be used as a short-term rental.
• Refinancing: Insured refinancing will be allowed for the purpose of building additional unit(s).
• Legal units: The new units must be fully self-contained units (e.g., basement suites with separate entrances, laneway homes) and meet municipal zoning requirements.
• Number of units: Maximum of four dwelling units including the existing unit.
• Maximum Property Value Limit: The “as improved” value of the eligible residential property against which the loan is secured must be less than $2 million.
• Maximum Loan-to-Value limit: Up to 90 per cent of the property value, including the value added by the secondary suite(s), in combination with any other outstanding loans secured by the property.
• Maximum amortization: 30 years.
• Additional financing must not exceed the project costs.

Low-Ratio Mortgage Switches

The amendments will remove the minimum qualifying rate requirement, effective December 16, 2024, for low-ratio (i.e., loan-to-value up to 80 per cent) renewals which satisfy the following “straight switch” criteria:

• The borrower’s mortgage was originated at a federally regulated financial institution and previously assessed against the minimum qualifying rate.
• The borrower will renew their mortgage with a new lender at renewal.
• The borrower has maintained the existing contractual amortization schedule.

In addition, mortgage insurers will allow borrowers to increase the unpaid principal balance by $3,000 to cover related transaction costs such as penalties or fees. Equity take out is not permitted.

Regulatory development

Consultation

As required by the Eligible Mortgage Loan Regulations and the Insurable Housing Loan Regulations, the Minister of Finance consulted the Governor of the Bank of Canada and the Superintendent of Financial Institutions on these regulatory amendments.

In addition, the Department of Finance Canada consulted the Canada Mortgage and Housing Corporation and the private mortgage insurers (Canada Guaranty and Sagen) on these amendments.

Modern treaty obligations and Indigenous engagement and consultation

No impacts to Indigenous peoples have been identified for these amendments.

Instrument Choice

The eligibility criteria for mortgage insurance are set out in regulations, so the only way to modify them is through a regulatory amendment.

Regulatory analysis

Benefits and costs

Minimum Qualifying Rate for Insured Mortgages

The new MQR supports the efficient functioning of the housing finance market by ensuring borrowers can maintain their mortgage payments in the event of rising interest rates or unforeseen income or expense shocks, in turn, mitigating the risks of rising household debt vulnerabilities. The new MQR makes it harder for some borrowers to qualify for a mortgage due to the interest rate floor, potentially limiting market access for some prospective homeowners. While the changes to the new MQR required financial institutions to update underwriting practices and information technology systems, being aligned with OSFI’s MQR for uninsured mortgages facilitated the implementation.

30-Year Amortizations for First-Time Home Buyers Purchasing New Builds

Permitting 30-year amortizations for first-time home buyers purchasing new builds supported the efficient functioning of the housing finance market by enabling more younger Canadians to afford a mortgage and encouraging new supply. To avoid inducing housing demand, this measure was designed to only apply to first-time homebuyers purchasing new builds. The costs include the potential to induce demand and cause house prices to increase, though this risk is mitigated by limiting access to first-time homebuyers purchasing newly constructed homes. Homeowners with 30-year amortizations will build home equity more slowly and pay more interest over the life of the mortgage compared to a 25-year amortization. Financial institutions that offer this new insured mortgage product will need to develop procedures to ensure that homeowners meet the eligibility criteria.

30-Year Amortizations for all First-Time Home Buyers and all Purchasers of New Builds

Permitting 30-year amortizations for insured mortgages for all first-time homebuyers and all buyers of new builds, supports access to homeownership by enabling more Canadians, particularly younger generations, to purchase homes with reduced monthly mortgage payments. The costs include the potential to induce demand and cause house prices to increase. Homeowners with 30-year amortizations will build home equity more slowly and pay more interest over the life of the mortgage compared to a 25-year amortization. Financial institutions that offer this new insured mortgage product will need to develop procedures for ensuring that homeowners meet the eligibility criteria.

Increasing the Home Price Limit for Insured Mortgages to $1.5 million

Raising the mortgage insurance home price limit from $1 million to $1.5 million supports the efficient functioning of the housing market by updating mortgage insurance criteria to better reflect current market conditions and supports access to homeownership by helping more Canadians purchase homes with lower downpayments, especially in markets where median house prices exceed $1 million. The costs include the potential to induce demand and cause house prices to increase, though other qualification requirement (e.g., debt servicing ratios) are expected to limit the impact on demand.

Secondary Suites

Allowing insured mortgage refinancing for secondary suites and increasing the mortgage insurance limit to $2 million for those building secondary suites, will support the creation of additional housing units and expand Canada’s housing supply. This measure will increase taxpayer exposure to the housing market, but this cost is mitigated by guarantee fees that mortgage insurers pay to the federal government and the benefit of the additional housing units that would be built.

Low-Ratio Mortgage Switches

Removing the MQR requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance for the mortgage supports competition in the housing market by making it easier for homeowners with mortgages that are renewing to shop around for a better rate. This measure will transfer the risk of an uninsured mortgage from the private sector to taxpayers, but the cost is mitigated by guarantee fees that mortgage insurers pay to the federal government and by limiting the measure to switches from federally regulated financial institutions to ensure that the borrower was previously assessed against the minimum qualifying rate.

Small business lens

The amendments do not impose a disproportionate burden on small businesses. The new MQR for insured mortgages aligns with OSFI’s MQR for uninsured mortgages. The removal of the MQR requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance also aligns mortgage insurance rules with OSFI guidelines.

The amendments to permit 30-year amortizations for all first-time home buyers and all purchasers of new builds, to increase the $1 million home price cap, and to help homeowners build secondary suites are permissive in nature, in that they enable lenders to offer a new insured mortgage product, subject to the eligibility criteria that are outlined in the amendments.

One-for-one rule

The one-for-one rule does not apply as these amendments do not increase costs or administrative burden for businesses.

Regulatory cooperation and alignment

The Minister of Finance consulted the Superintendent of Financial Institutions and the Governor of the Bank of Canada on these amendments, as required by the Eligible Mortgage Loan Regulations and the Insurable Housing Loan Regulations. The new MQR for insured mortgages and the removal of the MQR requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance for the mortgage align mortgage insurance rules with OSFI’s requirements for uninsured mortgages.

Strategic environmental assessment

In accordance with the Guidelines for Implementing the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, the Department of Finance completed a Preliminary Scan in relation to these amendments, which did not identify the potential for important environmental effects, either positive or negative.

Gender-based analysis plus

The new MQR for insured mortgages provides a buffer against rising interest rates and unforeseen financial challenges, potentially benefiting a broad demographic of mortgage borrowers and supporting financial stability for all Canadians. The new MQR makes it harder for some borrowers to qualify for a mortgage due to the interest rate floor, potentially limiting market access for some prospective homeowners.

Permitting 30-year amortization for all first-time homebuyers and all purchasers of new builds and raising the $1 million home price cap is expected to benefit younger Canadians by helping them afford a mortgage and purchase homes with a lower downpayment.

Amendments to help homeowners build secondary suites are expected to benefit all Canadians by encouraging new housing supply.

Removing the MQR requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance for the mortgage is expected to benefit homeowners by making it easier for them to shop around for a better rate.

Implementation, compliance and enforcement, and service standards

Implementation

The changes to the minimum qualifying rate (MQR), announced on May 20, 2021, via a Ministerial statement, came into effect for all insured mortgages approved on or after June 1, 2021.

The changes to permit 30-year amortizations for first-time home buyers purchasing new builds, with the eligibility parameters that the government announced on June 11, 2024, came into effect on August 1, 2024.

The changes to permit 30-year amortizations for all first-time homebuyers and all purchasers of new builds, and to increase the home price limit to $1.5 million were announced on September 16, 2024, their parameters were published in a technical backgrounder on September 24, 2024, and the measures came into effect on December 15, 2024.

The changes to permit insured mortgage refinancing to build secondary suites were announced in Budget 2024, the parameters were published in a technical backgrounder on October 8, 2024, and the changes came into effect on January 15, 2025.

The changes to remove the MQR requirement for uninsured mortgage holders who switch from a federally regulated lender to a lender that purchases portfolio insurance for the mortgage were announced in the 2024 Fall Economic Statement, the parameters were published in a technical backgrounder on December 16, 2024, and the changes came into effect on December 16, 2024.

Compliance and enforcement

These amendments do not require any new mechanisms to ensure compliance and enforcement.

As the prudential regulator of federally regulated financial institutions, the Office of the Superintendent of Financial Institutions (OSFI) oversees private mortgage insurers’ compliance with the Eligible Mortgage Loan Regulations (made pursuant to the Protection of Residential Mortgage or Hypothecary Insurance Act).

CMHC reports to Parliament through the Minister of Housing, Infrastructure and Communities and is subject to the accountability framework for Crown corporations. Under the National Housing Act, the Superintendent of Financial Institutions is required to undertake examinations or inquiries to determine whether CMHC’s commercial activities are being conducted in a safe and sound manner, with due regard to its exposure to loss. The Superintendent must also report the results of any examinations or inquiries to the Government.

Contact

Matthew Boldt
Acting Senior Director, Housing Finance
Financial Stability and Capital Markets Division
Financial Sector Policy Branch
Department of Finance Canada
Telephone: 613‑369‑4023
Email: matthew.boldt@fin.gc.ca

Jeff Miller
Legal Services
Department of Finance Canada
Telephone: 613‑369‑3326
Email: jeff.miller@canada.ca