New mortgage rules kick in today. What is changing?

New mortgage rules from the federal government are now in effect.

As of Aug. 1, first-time buyers purchasing newly-built homes will now have 30 years to pay off an insured mortgage instead of 25, which is required for downpayments of less than 20 per cent. The change was announced in April's federal budget as a measure to help tackle the housing crisis.

Will it make a difference?

CTV's Patricia Boal spoke about the new 30-year mortgages available for some first-time homebuyers with Manon Fredette, a real estate agent at RE/MAX Absolute Walker Realty.

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The interview below has been lightly edited for clarity.

Patricia Boal: It's a very specific category, but will these 30-year amortizations make a difference?

Manon Fredette: I believe that it can definitely make a difference for first-time homebuyers. Obviously, this is who the program is targeting. The idea of just having extra cash flow in their pockets at the end of each month will definitely help every household in Canada.

Boal: Certainly the deputy prime minister is framing it that way. Chrystia Freeland is saying this is more affordable, but there's a big headline in the Toronto Star this morning, quoting a Toronto realtor, saying it's a whole lot of nothing, that it's redundant because it's on new builds and often on new builds you have to put down more than 20 per cent anyway, so who is it really helping or how much is it helping? Is there any argument there?

Fredette: I would say, obviously, it will not help anyone who is already on the market, as it's exclusive to the first-time homebuyer. It has to be an insured mortgage, meaning it's 20 per cent or less that they're putting down, so for those people who are already struggling, this will help make a difference. For the everyday Joe, it might not affect us in the same way because we don't qualify for this program. And even if you did, as soon as you extend it, you are paying a premium for this type of service. Therefore, you will pay more interest in the long run. Either you pay more now, for a shorter length of mortgage, or you take it with a 30-year amortization to give yourself a little bit more time, a little bit more cash flow, but at the end, you're paying more interest.

Boal: Those people who, before this, already qualified for a 30-year amortization, has there been a lot of uptake on that in recent years, people wanting to spread it out to be able to afford to be in this market?

Fredette: I think some people have had no choice, simply because household expenses have been climbing up so fast. Having that extra money in your pocket at the end of every month can definitely help, but I think the average Canadian still prefers to get out of debt as fast as possible.

Boal: What has the interest been in these new rules?

Fredette: As soon as the interest rates go down it always stimulates a few additional buyers who have been waiting. The calls aren't coming in just because of this little quarter-point, but anyone who is on the fence is definitely jumping at the occasion to secure a better interest rate than what they were offered for the past year or so. Every little bit will help.

Boal: Is it disappointing that there hasn't been more of a flurry of activity? We had the one rate cut, it's not happening yet, but then the Bank of Canada cuts again and still it's been a bit of a sluggish summer.

Fredette: I agree. I haven't noticed that it's made a massive difference, with my market, anyhow.

Boal: Will it, if there's another cut in September?

Fredette: I believe it might. I think people are waiting it out to see if maybe they can secure a better interest rate in the long run. It definitely helps everyone if they can lock it in for something a little more affordable.

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