10 Mar

CMHC to Increase Mortgage Insurance Premiums


Posted by: Jeff Parsons



OTTAWA, February 28, 2014 — Following the annual review of its insurance products and capital requirements, CMHC will increase its mortgage loan insurance premiums for homeowner and 1 – 4 unit rental properties effective May 1, 2014.

The increase applies to mortgage loan insurance premiums for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums. This does not apply to mortgages currently insured by CMHC.

CMHC’s capital management framework is consistent with international practices and Canadian guidelines for mortgage insurers. Increased capital targets are consistent with Canadian and international industry trends and makes the financial system more stable and resilient.

“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.”

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 1st, CMHC Purchase (owner occupied 1 – 4 unit) mortgage insurance premiums will increase by approximately 15%, on average, for all loan-to-value ranges.

Loan-to-Value Ratio Standard Premium (Current) Standard Premium (Effective May 1st, 2014)
Up to and including 65% 0.50% 0.60%
Up to and including 75% 0.65% 0.75%
Up to and including 80% 1.00% 1.25%
Up to and including 85% 1.75% 1.80%
Up to and including 90% 2.00% 2.40%
Up to and including 95% 2.75% 3.15%
90.01% to 95% – Non-Traditional Down Payment 2.90% 3.35%

CMHC reviews its premiums on an annual basis and, going forward, plans to announce decisions on premiums in the first quarter of each year. The homeowner premium increase follows changes CMHC made to its portfolio insurance product earlier this year.

As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable housing solutions that will continue to create vibrant and healthy communities and cities across the country.

10 Mar

How Lower Rates are Making Variable Mortgages More Tempting


Posted by: Jeff Parsons

Garry Marr | March 4, 2014


Consumers facing record housing prices are probably increasingly tempted to go with a floating rate mortgage and all the risks that come with an interest rate linked to prime.

The lure is right in your face on every mortgage rate comparison site. The five-year fixed-rate mortgage has dropped as low as 3.09% with discounters and the major banks aren’t too far off that rate, most of them offering special deals. All this comes as yields in the bond market have dropped, sending fixed rates down.

Floating rate mortgages are as low as 2.35% with the discount off the prime lending rate 65 basis points. Better yet, it has never been easier to get a variable rate mortgage since the government changed the rules in April 2010 so anyone applying for a variable rate can qualify based on the five-year posted rate.

2,530 homes were sold in Vancouver in February, a 40.8% increase from a year ago, while Calgary sales jumped 8.7% from last year.

The qualifying rate is based on an average of the six big banks’ posted rate for a five-year closed mortgage. Declining bond yields have lowered that qualifying rate to 4.99%.

The decline may not sound like much but Rob McLister, editor of Canadian Mortgage Trends, says it means a consumer with a $300,000 home and 5% down needs 2% less income than they did just a few months ago.

Ottawa changed the rules about four years ago to tilt the playing field in favour of locking in your mortgage. When you lock in your mortgage for a term of five years or longer, you are able to use the rate on your contract for determining how much you can borrow. Go variable and you must use qualifying rate which is still almost 50% higher.

“There has been talk of changing it, speculation that the [Office of the Superintendent of Financial Institutions] will mandate the banks use the qualifying rate for five years terms and longer,” said Mr. McLister, noting nothing has happened yet.