Regulations trigger rising premiums on mortgage insurance

Regulations trigger rising premiums on mortgage insurance | Insurance Business Canada

Regulations trigger rising premiums on mortgage insurance
The premiums on mortgage insurance are going up Friday because the Office of the Superintendent of Financial Institutions (OSFI) is making mortgage insurers keep more in the bank.

The Canada Mortgage and Housing Corporation (CMHC), which sets the rate, said regulatory capital requirements play a role in the premiums on top of covering claims and expenses.

“Capital requirements are an important factor in determining mortgage insurance premiums. The changes reflect OSFI’s new capital requirements that came into effect on January 01 of this year that 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 said in an email.

The higher premium is expected to put $5 on Canadians’ monthly mortgage payments, which, it is hoped, will be manageable. Very few Canadians default on their loans, according to CMHC and that fact doesn’t look like changing.

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“Despite increases in some regions, our overall arrears rate has remained stable over time. It was at 0.32% as of September 30, 2016,” CMHC said.

The Crown corporation explained premiums are calculated in relation to how much is being lent and what the value of the mortgage is.

“Premiums are calculated based on the loan-to-value ratio of the mortgage being insured,” it said. “CMHC is increasing premiums in all loan-to-value ranges in response to the new capital requirements that came into effect on January 01.”


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