CMHC hiking mortgage loan insurance premiums for homebuyers

The Canadian Mortgage and Housing Corporation is increasing its homeowner mortgage loan insurance premiums, effective March 17, 2017. For the average CMHC-insured homebuyer, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment.

“We don’t expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” said Steven Mennill, senior vice-president, Insurance. “The changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”

The changes reflect OSFI’s new capital requirements, which came into effect on January 1st of this year and which require mortgage insurers to hold additional capital. Capital holdings create a buffer against potential losses, helping to ensure the long term stability of the financial system.

CMHC says that during the first nine months of 2016:

• the average CMHC-insured loan was approximately $245,000;
• the average down payment was approximately 8%; and
• the average gross debt service ratio was 25.6%. To qualify for CMHC insurance, a homebuyer’s GDS should not exceed 32% of their total monthly household income.

CMHC regularly reviews its premiums and sets them at a level to cover related claims and expenses while also reflecting the regulatory capital requirements.

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