Canadian mortgage premiums, rates on the rise
These days in Canada, mortgages are a newsworthy topic. Several developments have been announced recently that will significantly impact how people pay for and insure their mortgages.
In an interview with The Globe and Mail (available to subscribers only), Genworth MI Canada CEO Stuart Levings revealed that new mortgage insurance regulations are expected to be implemented in 2017 by the Office of the Superintendent of Financial Institutions. For houses in markets where home prices are considerably higher than incomes, mortgage prices should jump by an average of 15 per cent.
Genworth is one of two private home insurers in Canada and its public competitor is the Canada Mortgage and Housing Corporation. Levings believes this development is problematic for the industry as a whole. Having higher capital requirements on premiums will compromise insurer profits. It also comes on the heels of the introduction of a stress test for homebuyers, which disqualifies many potential buyers who don’t have rock-solid finances that could handle increased interest rates.
Not only are mortgage insurance premiums on the rise, mortgage rates are as well. In the wake of the stress test regulation, both RBC and TD announced this month that they will be raising their rates.
TD broke a 15-month streak of stagnancy to raise its mortgage prime rate by 0.15 points to 2.85 per cent. It was a change that will only affect customers with variable rate mortgages, not those with fixed rates.
RBC altered several of its rates, which fall both above and below TD’s prime rate. For example, borrowers with a three-year fixed-rate mortgage and an amortization of under 25 years will pay 2.69 per cent. Four- and five-year rates are 2.79 per cent and 2.94 per cent respectively.