Mortgage insurance premiums going up again
With housing market prices out of control in Canada's major urban centres last year—and on the rise in many others—one approach that the government adopted to combat housing issues was to get stingier on how the financial security of prospective homebuyers, to ensure that they could actually follow through with their purchases if a more adverse monetary climate were to arise.
Now Canada's mortgage insurers are following suit, as evidenced by yesterday's announcement that both Genworth and Canada Mortgage Housing Corporation (CMHC) will be increasing their mortgage insurance premium rates—the third such increase in the past four years.
The increases appear to be prompted also in part by new capital requirements from the Office of the Superintendent of Financial Institutions, which stipulate that mortgage insurers now have to hold more capital than they did previously.
For most mortgages, the changes won't result in any staggering increases. CMHC has said that the average homebuyer is likely to see just a $5 monthly increase in payments while Genworth first-time homebuyers will see approximately $6 more over that same period. In fact, unlike with previous boosts to insurance premiums, the buyers who will be hit the hardest are the ones who have put down larger down payments, and the fees will be a reflection of that figure. Those increases could be up to several times larger than the typical $5 or $6 ones.
According to a CMHC executive, approximately two-thirds of homebuyers taking out a mortgage insured by the Crown corporation have down payments of less than 10 per cent.
Changes for both organizations will come into effect on March 17.