Lightening the burden: government can act on commitment to increase the insured mortgage cut-off to $1.25M; index it to inflation

By Staff

July 15th, 2023



In the wake of a tenth interest rate hike, which brought the Bank of Canada’s policy interest rate to 5% on Wednesday, six major banks have pushed their prime rate up by 25 basis points, bringing it to 7.2% — the highest level since March 2001.

The Wednesday hike also means that variable-rate mortgage holders and anyone with a home equity line of credit should brace for higher monthly payments.

According to calculations for Ontario provided by, based on the average home price reported by the Canadian Real Estate Association in June, a homeowner putting 10% down on a $928,897 home with a five-year variable rate will now see their rate increase to 6.05% (amortized over 25 years) and their monthly payment will increase to $5,540. In other words, that homeowner will now need to shell out $127 more in monthly mortgage payments and $1,524 more per year than they would have with the benchmark rate at 4.75%.

The hike doubles down on the affordability woes that are increasingly pushing Canadians out of the homeownership market.

“This could very well be the straw that breaks many borrowers’ backs,” Lauren van den Berg, President and CEO of Mortgage Professionals Canada, said in a statement on Wednesday. “Prior to today’s rate hike, the cost of mortgage borrowing had already increased close to 70% since the Bank of Canada’s initial increase last March.”

As such, borrowers are already struggling to make ends meet, with three-quarters of variable-rate mortgages already at their trigger rate — and that was before June’s increase — according to a recent report from Desjardins.

While fixed-rate borrowers may be safe from the mounting rate pain for the time being, Victor Tran, mortgage and real estate expert with RATESDOTCA, stresses that those borrowers will now renew into higher rates.

“I mean, the fixed rates have been on the rise for the past month now,” he adds. “Rates haven’t been this high in over 16 years.”

In light of the new rate realities, mortgage professionals are urging borrowers up for renewal in the coming months to shop around before settling on a lender. The same goes for prospective borrowers.

“Up until about maybe last year, the rate difference between, let’s say Scotia, RBC, BMO, wasn’t a whole lot. We’re talking about 0.1%, 0.2%,” says Tran. “But I find now there’s a much larger difference — as much as a quarter percent or even half a percent difference. That can be quite significant in terms of interest savings.”
As well, says James Laird, Co-CEO of, homeowners should lock in a rate well before it’s time to renew.

“If your mortgage is up for renewal within the next year, it’s a good idea to hold a rate with a new lender now,” he says, adding that pre-approval allows Canadians to hold today’s fixed rates for up to 120 days. “If rates jump up further in the future, it should make sense to break your existing mortgage and switch to that new lender before your rate hold expires to lock in the lower rate.”

But thinking bigger picture, van den Berg calls for “a clear policy response from decision-makers” to address housing affordability — one that extends beyond monetary policy.

“The federal government could introduce a return to 30-year amortization periods for insured mortgages. It could also eliminate the stress test on mortgage transfers, switches, and renewals to help Canadians find the financing solutions that best fit their budget,” she says.

“Finally, the government can act on its commitment to increase the insured mortgage cut-off from $1M to $1.25M, and index it to inflation to better reflect today’s housing prices. A permanent National Housing Round Table comprised of these groups, established by the federal government, could also help ensure effective action.

We need all governments to work together, along with industry and civil society to help keep the dream of home ownership alive in Canada.”

Republished from Storeys, the online platform for all your real estate news.  Featuring insights from industry insiders, on-the-ground realtors, experienced brokers, and market heavyweights, STOREYS provides first-time homebuyers, seasoned investors, and avid real estate readers alike with the tools and resources they need to make informed decisions.  Click HERE for more



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