Canada’s Housing Agency Boosts Mortgage Premiums Again
By Katia Dmitrieva, Bloomberg News
Canada’s government-owned housing agency is raising premiums for the riskiest homebuyers as it seeks to limit taxpayer exposure to the housing market .
On average, the charges will add about C$5 a month to the average Canadian’s mortgage payments, Canada Mortgage & Housing Corp. said in a statement Tuesday. The increase ranges from 40 basis points for those with 95 percent loan-to-value ratio to 115 basis points for those with 80 percent.
“The changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability,” said Steven Mennill, senior vice-president of insurance at CMHC, in the statement.
The organization also increased premiums in June by 15 percent for homebuyers with a downpayment of less than 10 percent. That also meant an average increase of about C$5 a month, CMHC said at the time. The agency has been limiting its exposure to the country’s booming housing market as prices jumped 14 percent in 2016 from the prior year.
In Canada, buyers putting down less than 20 percent are required to insure their mortgages, and pay a premium to either CMHC, the country’s largest mortgage insurer with C$514 billion of insurance-in-force, or one of the private insurers such as Genworth MI Canada Inc.
During the first nine months of 2016, the average downpayment was 8 percent and buyers spent about 26 percent of their income on servicing their mortgage debt, CMHC said.