What is this new 2023 "Canada Mortgage Charter”?

Many are asking what plans the current federal government has created to help ease higher living costs and support the Canadian housing market. Finance Minister Chrystia Freeland recently outlined a series of measures, including the introduction of the Canadian Mortgage Charter, in response to this pressing concern. This charter aims at improving mortgage affordability and increasing housing supply, sparking discussions within the real estate and financial sectors.

The proposed Canadian Mortgage Charter has received attention as a step towards addressing housing affordability issues. It seeks to set expectations for how lenders interact with homeowners throughout the mortgage process, providing relief to Canadians facing higher monthly payments amid the modern higher interest rate environment.

One notable aspect highlighted in recent discussions is the federal government's decision not to reapply the stress test on renewals, switches, and transfers of insured mortgages. While this policy is acknowledged as beneficial for insured mortgages, there is a call for its extension to cover all mortgages, given that only 27% of Canadian mortgages are insured, according to the latest Canadian Mortgage and Housing Corporation report.

The wave of renewals on the horizon, with two-thirds of Canadian mortgage holders up for renewal over the next three years, adds urgency to the need for supportive measures. Homeowners, especially in the current interest rate environment, express concerns about their ability to renew. The Canadian Mortgage Charter is perceived as a crucial step to better protect mortgage holders at renewal, codifying the Financial Consumer Agency of Canada’s ‘Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances’ introduced in July.

While acknowledging these positive steps, there is a consensus that more work needs to be done to improve affordability and support the Canadian mortgage industry. Advocates are pushing for further actions, including the introduction of a return to 30-year amortization periods for insured mortgages to allow greater opportunities for home ownership. They also call for the elimination of the stress test on all mortgage renewals, switches, and transfers, aiming to provide relief for homeowners in the current interest rate environment.

Increasing the insured mortgage cut-off from $1 million to $1.25 million, indexed to inflation, is proposed to better reflect today's housing prices. Additionally, there is a push for the government to grant a digital income verification tool to the mortgage industry to help crack down on fraud. Establishing a permanent national housing roundtable is suggested, bringing together all orders of government, industry, and the not-for-profit sector to address ongoing housing challenges.

As the federal government introduces the Canadian Mortgage Charter to navigate the challenges of the current housing market, it aligns with a broader focus on addressing affordability issues. The goal is clear: to provide support to Canadians facing the daunting task of affording their homes amid a time of higher interest rates. The charter represents a step towards a more accessible and sustainable housing market, fostering hope for the dream of homeownership to remain alive for Canadians.

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