2024 Federal Budget Analysis for Canadian Mortgages

Every year, the Canadian government releases its Federal budget, and residents wait to see how the changes will impact them. While the 2023 budget focused on improving the economy and making daily life affordable, the 2024 budget heavily targets the housing market. 

A study from Abacus Data highlights that 68% of Canadians in March 2024 were worried about the housing crisis, stating they believe accessibility and affordability will continue to worsen. 

While the housing market is still experiencing issues, the budget clearly outlines a targeted approach to creating more housing options and making ownership accessible for first-time buyers. 

Discover how these changes might impact your mortgage options with our complete analysis of the 2024 Federal budget. 

2024 Budget Key Points

1. Capital gains rates will increase from 50% to 66.67% for individuals with gains that exceed $250,000. These rates will impact those with investments or second properties, but they level the playing field for families on a lower income. 
2. The government will build 3.87 million homes by 2031, addressing the shortage and making ownership more affordable for first-time buyers. 
3. New RRSP withdrawal limits and longer mortgage amortization periods reduce property ownership costs and give first-time buyers more opportunities. These rates don’t extend to current homeowners, but mortgage specialists advocate for changing the rules. 
4. In the coming years, getting a mortgage will be easier, and capitalizing on the new rates can help young people transition from renting to ownership. 

Let’s break these changes down one by one:

1:  Increased capital gains rate

Canada’s current capital gains tax inclusion rate is 50%, but it will increase to 66.67% on June 25, 2024. The increased rate is intended to ensure that individuals with high-value assets, such as investments or second properties, pay their fair share. 

Individuals with capital gains that exceed $250,000 will be subject to the 66.67% increase, leading many to explore ways to reduce the financial implications of the upcoming changes. 

Accelerating transactions and utilizing carrybacks of capital losses can save money, but the government hopes to generate a higher income through these increases.

This may open up new properties on the market, giving first-time homebuyers an opportunity to secure their mortgage.

2: Increasing home density and propelling new home builds in Canada

The 2024 budget also revealed the government’s aims to build 3.87 million homes by 2031, making ownership more accessible for residents. Government entities will have new roles that support the drive to create affordable housing. 

For example, Canada Lands Company will oversee 29,000 new constructions between 2024 and 2025, and 20% of those properties will be affordable units. 

With an influx of homes coming to the market, buyers can look forward to affordable homes in tandem with the new budget announcements focused on helping you save for your mortgage.

3: Help for first-time homebuyers with increased RRSP withdrawal limit

Canada’s Home Buyers Plan lets first-time buyers withdraw a tax-free amount from their RRSP (Registered Retirement Savings Plan) to make a downpayment on property. 

The tax-free amount you could previously withdraw was capped at $35,000, but the 2024 budget announced an increase to $60,000, with repayment grace periods increasing to five years from two. 

4: Announcement of 30-year mortgage amortizations

We all know the struggles young Canadians face when trying to climb the first step of the property ladder, but the 2024 budget recently announced 30-year amortizations for first-time buyers in an attempt to help younger people purchase homes. 

While it’s only a five-year increase from the current amortization period of 25 years, these changes will make monthly repayments more affordable. 

How Do Federal Budget Changes Affect Canadian Mortgages?

While there are many positive changes coming in 2024, it’s important to remember that building new homes will take time, as the government utilizes public lands. However, this gives the opportunity to continue saving and building up the downpayment for a home in the meantime – leveraging high-interest savings accounts, TFAS, FTHB accounts, and GICs to maximize your savings over the next 7 years. 

The plan to tax vacant lands could also lead to more construction, but availability will gradually increase from 2024 to 2031. 

With changes to amortization periods and increased RRSP withdrawals, homeownership is set to become more affordable. 

Increased Mortgage Amortization Periods

Longer amortization periods will help first-time buyers enjoy the benefits of property ownership while improving the Canadian market. 

However, mortgage specialists feel that other people are being overlooked and would like the 30-year rule to extend to current homeowners. 

First-time buyers can reduce their monthly payments, making homeownership a real possibility instead of a distant dream. 

More Home Builds Create More Affordability

The housing market is always subject to availability, and Canada’s housing shortage means those on lower incomes often miss out on ownership and fall into the continuous renter’s trap. 

The 2024 budget clearly states that building new homes is a priority, making properties more affordable in the future. 

When supply is low, but demand is high, property prices increase, but less competition means more affordable housing. As the government fulfills its commitment to construct more properties, first-time buyers can compete in a previously impenetrable market. 

Increased RRSP Withdrawals Benefit FTHB

The RRSP increases will significantly benefit first-time homebuyers, enabling them to withdraw higher amounts from their retirement savings and purchase a property.

By almost doubling the eligible withdrawal amount from $35,000 to $60,000, buyers can make regular contributions to their RRSPs, preparing for the future. 

It’s also important to mention that increased amounts mean Canadians might control their finances more and make regular contributions to their retirement savings plans. 

Can We Look Forward To Interest Rate Cuts?

With so many positives to take from the 2024 Federal budget announcement, it’s easy to see why Canadians are hoping for interest rate cuts. Unfortunately, the rates will stay the same at this time, with the Bank of Canada announcing a 5% hold this spring. 

However, our 2024 interest rate predictions reveal potential cuts in June if the economy continues to recover. 

If the rates do decrease, prospective buyers can expect lower mortgage rates while also taking advantage of higher RRSP withdrawals and longer amortization periods. 

Contact A Victoria BC Mortgage Broker To Learn More

Purchasing a property might seem like a distant dream, but the future looks bright for first-time buyers. By regularly contributing to your RRSP and leveraging the new incentives, you can move away from renting and enjoy the convenience of homeownership. 

If you’d like to discuss your options or are ready to purchase a property, our dedicated mortgage brokers can help you find the best deal for your needs. 

With a vast network of lenders, we work with people from all backgrounds, including first-time buyers, individuals with bad credit scores and those looking to save money. 

Please feel free to contact us with any questions or begin the application process today.