The Canadian Mortgage and Housing Corporation today announced it is raising mortgage loan insurance premiums effective May 1 – in an effort to meet higher capital targets.
This morning’s announcement comes on the heels of CMHC’s annual review of its insurance products and capital requirements.
“The higher premiums reflect CMHC’s higher capital targets” said Steven Mennill, CMHC’s Vice-President, Insurance Operations. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.”
The increase applies to mortgage loan insurance premiums for owner occupied, self-employed and one-to-four unit rental properties, including low-ratio refinance premiums. It does not apply to mortgages currently insured by CMHC.
For the average Canadian homebuyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on the housing market.
Effective May 1, CMHC Purchase (owner occupied one-to-four unit) mortgage insurance premiums will increase by approximately 15 per cent, on average, for all loan-to-value ranges.
The International Monetary Fund (IMF) had suggested deeper cuts to Canada’s government-backed mortgage insurance back in December, stating that “further measures should be considered to encourage appropriate risk retention by the private sector and increase the market share of private mortgage insurers.”
See related story: IMF wants deeper cuts to government-backed insurance
