Although owning a home is the cheapest it’s been in about three years, prospective purchasers are reluctant to take the plunge.COLE BURSTON/The Canadian Press
The housing market is in a funk.
Home prices are slumping, new projects are being cancelled and job losses are mounting in the property-development industry as buyers sit on the sidelines despite lower interest rates.
Although owning a home is the cheapest it’s been in about three years, according to a report by RBC Economics, it is easy to understand why prospective purchasers are reluctant to take the plunge. Home prices are still well above prepandemic levels and the U.S. trade war is casting a pall over the Canadian economy.
That confluence of factors is creating a bind for the federal government, which has pledged to make housing more affordable. In recent days, federal Housing Minister Gregor Robertson has made noises about intervening in the residential real-estate market.
“We’re looking at what tools and actions we can take federally to kickstart the market,” Mr. Robertson told The Globe and Mail last week.
“We’ve got to look at how to best support and intervene where needed.”
The Liberal government has already promised to eliminate the GST for first-time buyers for homes costing up to $1-million. But with home builders delaying or pulling the plug on new projects entirely, Ottawa will predictably face pressure from the industry to stoke consumer demand.
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Mr. Robertson has already dismissed the need for lower home prices. This past May, he made curious comments to journalists, stating that Canada instead needs to “deliver more supply” and “make sure the market is stable.”
It was reminiscent of the bizarre logic spouted by former prime minister Justin Trudeau.
If the Carney government is indeed averse to falling home prices, then it will naturally face the temptation to once again loosen mortgage insurance rules to create the illusion of improved affordability for cash-strapped buyers.
It’s predictable because it was the previous Liberal government’s go-to move.
Laxer eligibility for mortgage insurance, however, would only create new problems. It would add to consumer debt loads, aggravate the supply crisis and amplify the risk to taxpayers by increasing their exposure to the housing market, especially through the auspices of the Canada Mortgage and Housing Corp., or CMHC.
Mortgage insurance, which reimburses a lender if a borrower defaults on a loan, is required when buyers make a down payment of less than 20 per cent of a home’s total price.
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Under the current system, the federal government guarantees 100 per cent of CMHC’s obligations to lenders for insured mortgages. Private insurers Sagen MI Canada Inc. and Canada Guaranty Mortgage Insurance Co., meanwhile, receive 90-per-cent backing from Ottawa.
Before the last federal election, the former Trudeau government introduced new measures that were ostensibly designed to help home buyers by lowering the cost of down payments and monthly mortgage bills.
New mortgage rules, which took effect in mid-December, included expanded eligibility for 30-year insured mortgages.
In doing so, the government made 30-year amortizations available to all first-time homebuyers and all buyers of new builds, allowing them to make smaller monthly mortgage payments by giving them an additional five years to pay off their home loans.
The price cap for insured mortgages was also increased to $1.5-million, up from $1-million, enabling buyers to purchase costlier homes with smaller down payments.
Last year, the Bank of Canada estimated that one in four mortgages were insured when they were issued and that roughly $590-billion in outstanding mortgage debt was backed by the federal government.
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CMHC, the federal mortgage insurer, had $442-billion of insurance-in-force in the first quarter of 2025, which ended on March 31. That was up slightly from the $440-billion at the end of last year. Those figures represent the risk exposure to taxpayers through CMHC’s mortgage loan insurance activity.
(The Trudeau government also increased the legislative limit for CMHC’s insurance-in-force to $800-billion from $750-billion as part of the 2024 federal budget.)
In the wake of Ottawa’s latest mortgage-rule changes, household debt loads have started to edge higher even as the pace of consumer borrowing slows.
The ratio of household credit market debt to disposable income rose to 173.9 per cent during the first quarter of 2025, according to Statistics Canada. That compares to 173.5 in the fourth quarter of 2024.
Put another way, Canadians owed nearly $1.74 for every dollar that they earned during the first quarter of this year. Mortgages comprise the majority of that household debt.
Mr. Robertson has acknowledged there are no silver bullets to solve the housing crisis, but fiddling with CMHC mortgage insurance has proven politically expedient in the recent past.
We can only hope the Carney government shows more restraint.