MORTGAGE RULE CHANGES LIKELY POSITIVE AT THE MARGIN
THE TD COWEN INSIGHT
The Department of Finance is adding further support to the mortgage / housing market. Rule changes announced yesterday (effective December 15, 2024) are targeted at the first- time home buyer (FTHB), as well as new housing builds. We see this as positive, at the margin, for mortgage growth in 2025 and beyond.
The Department of Finance announced further changes to the mortgage market yesterday
(link here). Changes include expanding the eligibility for 30-year mortgage amortizations (up from 25-year) to all first-time home buyers (FTHB), and to all buyers of new builds. We estimate this affordability support could impact >40% of the mortgage/housing market. Previously the 30-year amortization rule change was only being applied to FTHB purchasing new builds (we estimate this applied to ~5% of the mortgage market; see our note here). The government is also increasing the house price cap for insured mortgages to $1.5mm (up from $1.0mm previously).
We estimate the extended amortization change could translate into ~4% incremental mortgage growth in 2025. Based on the average home price in Canada, average household income, and a 10% down payment, a 30-year amortization translates into ~10% more purchasing power (vs. a 25-year). This affordability support could impact >40% of the mortgage/housing market (~30% of housing sales are new builds, and ~20% of the remaining resale market are FTHB). A 10% increase in purchasing power to these areas could imply up to ~4% incremental mortgage growth.
We see further mortgage growth potential from the increased price cap for insured single- family mortgages ($1.5mm, up from $1.0mm previously). ~50% of the mortgage insurance market is in ON and B.C., where affordability is most pressured. Increasing this house price limit could potentially lift mortgage insurance volumes by ~25% (albeit likely less), or ~5% for the mortgage market overall (~20% of the mortgage market is FTHB seeking insured mortgages).
In our coverage universe, we believe First National Financial (FN-T, Buy, $37.84) is likely best positioned to benefit from these changes given they originate both insured and uninsured single-family mortgages. Atrium MIC (AI-T, Buy, $11.86) should also be positioned to benefit given 71% of their portfolio is commercial mortgages to housing/ condo developers (typically in the pre-construction permitting stage). EQB (EQB-T, Buy, $99.10) would benefit indirectly, in our view, from any positive impact on broader mortgage / housing market activity.