Mortgage insurance premiums from Canada Mortgage and Housing Corporation will be increasing March 17.
For the average homeowner whose mortgage is insured by CMHC, that could mean an increase in their monthly mortgage payment of about $5 on a $250,000 loan with a downpayment between 5% and 9.99%. The increase applies to new mortgage applications received after March 17. The premium for current mortgages or applications that are submitted before March 17 won’t be increased.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, the senior vice-president of insurance at CMHC. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”
CMHC is a Crown corporation that is the largest provider of mortgage insurance in the country.
Private insurer also raising mortgage insurance premiums
Canada’s largest private mortgage insurer, Genworth, is matching the CMHC premium hikes.
“We believe this new pricing is prudent and reflects the new regulatory capital framework for mortgage insurers,” said Stuart Levings, the president and CEO of Genworth Canada.
The increase is necessary because new rules that came into effect on Jan. 1 require banks and insurers to hold more capital against the value of the mortgages they’re holding. It’s also the latest in a suite of changes to mortgage rules implemented last fall by the federal government to help temper the furious housing market in some parts of the country, including Metro Vancouver.
Mortgage insurance is required by Canadian law whenever a homeowner’s down payment on a home purchase is less than 20 per cent of its total price. The premium can be paid in a lump sum, but it’s more typically added to the mortgage principal and repaid as part of a homeowner’s regular mortgage payments. The insurance protects lenders in case borrowers default on their loans.