Canada Mortgage and Housing Corp. has announced that it will hike mortgage insurance premiums for the third time in the last four year. The increases are set to kick in as of March 17th, and only apply to new insured mortgages.
This comes as a response to stricter capital requirements for mortgage insurers which were introduced at the start of the year. Federal rules require lenders to have mortgage insurance on any loan which has a down payment of less than 20 percent – the additional costs typically get passed onto the borrowers and added to monthly mortgage payments.
Approximately two-thirds of buyers taking out a CMHC-insured mortgage have down payments of less than 10 percent – meaning that they will likely see an additional couple of dollars on each mortgage payment due to the additional insurance.
First time homebuyers are now subject to a number of new rules that could make the process more difficult for them, including stricter testing criteria for insured mortgages. Some experts are saying that 2017 could be the most difficult time to enter the market for the last 10 years.
The goal of these changes is to maintain a healthy housing industry, and protect the financial industry and consumers from rising household debts.
CMHC noted that it expects home purchases with borrowed down payments to rise in popularity as Canadians struggle to emerge themselves into the housing market.
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