07:07 AM EDT, 09/17/2024 (MT Newswires) -- The Canadian federal government has announced major changes to mortgage policy aimed at enhancing housing affordability, noted National Bank of Canada.

Starting Dec. 15, the price cap for insured mortgages will increase from C$1 million to C$1.5 million. This adjustment reflects the sharp rise in home prices across Canada, which have doubled since the cap was last updated in 2012, said the bank.

The higher limit, however, is unlikely to cause an immediate surge in demand for C$1.5 million homes, as only 3.3% of insured loans currently fall within the C$850,000 to C$1,000,000 range, calculated National Bank.

The other measure announced by Ottawa, which is expected to have a more significant impact on affordability, is the expansion of eligibility for 30-year mortgage amortization to all first-time homebuyers and purchasers of newly built homes, stated the bank.

Extending the maximum amortization period from 25 to 30 years while opting to keep monthly payments unchanged will increase the purchasing power of borrowers making a minimum down payment by 9.7%, ranging from C$22,106 in New Brunswick to C$51,565 in Ontario, according to the bank.

Alternatively, homebuyers could take a more disciplined approach by opting for a 30-year amortization, which would lower their monthly payments by 8.9% for the same home, yielding savings ranging from C$107 in New Brunswick to C$248 in Ontario, it added.