How Mark Carney’s Liberal Government Could Reshape Canadian Housing and Mortgages

With Mark Carney now leading a Liberal minority government, Canada is poised for a significant shift in how housing is built, financed, and taxed. As a former Governor of the Bank of Canada and Bank of England, Carney brings serious economic weight to the Prime Minister’s Office—and with housing affordability still at crisis levels in cities like Toronto and Vancouver, expectations are sky-high.

But what will his leadership mean for homebuyers, mortgage rates, and affordability overall? Here’s a detailed look at the Liberals’ housing platform, what it means for the market, and how Canadian borrowers can prepare for what’s ahead.

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Who Is Mark Carney?

Mark Carney isn’t your typical political leader. He’s an economist first—best known for helping Canada navigate the 2008 financial crisis, and later guiding the UK through Brexit’s early economic shocks. Born in Fort Smith, Northwest Territories, Carney has a PhD in economics from Oxford and has spent decades at the highest levels of global finance.

Now as Prime Minister, Carney is pitching himself as a stabilizer during unstable times. His housing strategy reflects both bold ambition and cautious realism. The Liberals under his leadership are promising to double home construction, increase affordable housing, support modular construction, and stabilize mortgage rates—while shielding Canada from the economic fallout of renewed U.S. tariffs.

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A Federal Developer: “Build Canada Homes”

One of the biggest ideas in Carney’s platform is the creation of a national housing agency called Build Canada Homes—a federally-backed developer that would directly construct affordable and prefabricated homes across the country. The goal is to double the pace of housing construction to 500,000 homes annually, using federal land and streamlining red tape.

The agency would have access to $25 billion in financing for modular homebuilders, plus another $10 billion in low-cost capital for affordable housing projects. This echoes successful public housing models used in places like Austria and Singapore.

If done well, it could dramatically shift housing supply in expensive cities and help renters and first-time buyers alike. But execution will be critical. Large-scale government-led housing hasn’t been tested in Canada in decades—and critics point to potential risks around delays, costs, and efficiency.

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A Push for Prefabricated and Modular Housing

To speed up construction and reduce costs, the Liberals are making prefabricated and modular homes a cornerstone of their plan. These homes are built off-site in factories and assembled on-location, cutting down on labour needs and environmental impact.

The federal government plans to stimulate demand by becoming a bulk purchaser of modular housing, while also working to harmonize building codes across provinces. But for this to scale quickly, Canada’s fragmented building regulations—currently managed at the provincial and municipal levels—would need serious alignment.

Experts like Dr. Mike Moffatt believe prefab homes could be game-changers, but only if local governments come on board.

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Reintroducing the MURB Tax Incentive

The Liberals also plan to revive the Multi-Unit Rental Building (MURB) tax incentive, originally launched in the 1970s. This would let investors deduct certain costs of building rental units from their personal taxes, encouraging more capital to flow into purpose-built rentals.

The idea is to shift investor focus away from buying individual condos for rent and toward supporting long-term rental supply. But critics warn that outdated zoning and high urban land prices could limit its effectiveness, especially in big cities where new rental buildings face long planning delays.

Still, if paired with fast-track approvals and better financing options, MURB could bring much-needed rental stock to the market.

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GST Relief for First-Time Homebuyers

Another promise: cutting the GST for first-time homebuyers on pre-construction homes. The Liberals would fully eliminate the GST on homes under $1 million and reduce it on homes priced between $1 million and $1.5 million.

This would offer direct savings—up to tens of thousands of dollars—for qualifying buyers. But analysts point out that while this move helps on the demand side, it doesn’t directly increase housing supply. Builders are already slowing down new projects due to construction costs and financing challenges, and GST relief won’t necessarily reverse that trend alone.

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Factors Ottawa Can’t Fully Control

As ambitious as the federal housing plan is, there are still major market forces beyond Ottawa’s reach.

For starters, development financing is tight, especially in places like Toronto and Vancouver where construction costs are high and lenders are risk-averse. Rising global inflation and Trump-era tariffs are only adding pressure, especially if they lead to higher material costs or supply chain disruptions.

Professor Andy Yan at Simon Fraser University warns that no housing policy exists in a vacuum. The performance of Canada’s housing market—and by extension, mortgage rates—will still depend heavily on global trade, interest rates, and inflation trends.

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Tax Relief and Broader Affordability Policies

To support affordability more broadly, the Liberals are rolling out complementary financial measures, including:

• A new middle-class tax cut, saving dual-income families up to $825 annually
• Reducing minimum withdrawals from RRIFs by 25% to help seniors
• A temporary 5% increase to the Guaranteed Income Supplement
• Expanding eligibility for the Disability Tax Credit
• More funding for skilled trades training to address the construction labour shortage

Together, these policies are meant to increase household cash flow, ease borrowing burdens, and expand the pool of qualified workers to support housing growth.

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What’s Next for Interest Rates?

With Carney’s government focused on stabilizing trade and inflation, all eyes are on the Bank of Canada’s next moves.

So far in 2025, the BoC has cut its policy rate twice, bringing it to 3%. But with economic headwinds still building, further cuts may be in store. For variable-rate borrowers, this could mean lower monthly payments—particularly for those on adjustable-rate mortgages (ARMs), which track BoC changes in real time.

On the fixed-rate side, things are less predictable. Bond yields, which influence fixed mortgage rates, remain volatile due to inflation concerns and fears of rising deficits. If government spending increases and deficit projections worsen, investors may demand higher returns—raising fixed mortgage rates across the board.

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What This Means for Mortgage Borrowers

If the Liberals are successful in boosting housing supply, it could eventually bring more balance to the market and reduce price pressures—especially in dense urban areas. Over time, this could make homes more affordable and ease the debt burden for future buyers.

But fiscal expansion—especially if it leads to larger deficits—could raise the cost of borrowing in the medium term. This is why homeowners and buyers need to prepare for interest rate volatility over the next 12 to 18 months.

For those renewing soon or planning to buy, the best approach is a personalized mortgage strategy. Consider securing a rate hold now, especially if you’re leaning toward a fixed rate. For flexible borrowers, exploring variable-rate options could offer savings if the BoC continues its rate-cutting cycle.

For a deeper understanding of Carney’s proposed strategies and their potential impact on mortgage regulation and affordability, explore our breakdown of how his Liberal agenda could influence housing in Canada.

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Final Thoughts: Be Ready, Stay Flexible

The Liberals under Mark Carney are aiming for a housing reset—more homes, more affordability, and more support for mortgage borrowers. But execution will take time, and the road ahead will be shaped just as much by inflation, trade, and interest rates as it will by policy.

If you’re navigating your next mortgage decision, don’t wait for perfect clarity.
💬 Ask Us How Liberal Policy Could Affect Your Rate and get pre-approved, and lock in the most favourable terms available.

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