The Canadian Mortgage and Housing Corporation announced early this year that it was approaching its $6 billion government-instated cap of how much it can issue for mortgage insurance. Now following that announcement, CMHC has come out with new stats regarding how much insurance is expected to grow over the next three years, and where the insurance amount will be in 2016. All of the stats point towards one fact and one fact alone – CMHC will start being much more selective in who they choose to insure for a mortgage.
CMHC has projected that between 2011 and 2014, the amount of money put towards insuring mortgages will grow by $30.8 billion. This is a huge drop from the $170 billion growth the government agency saw during the years of 2007 – 2010, years that covered the height of the recession when no one seemed to have enough money, and therefore couldn’t afford the total down payment for their Toronto mortgages. The CMHC also says that they expect their insured mortgage levels to be at $587.7 billion by 2016, which is dangerously close to their cap.
The news means that homebuyers are going to have to wait longer to get that mortgage, while they save up enough for a down payment; or they’ll need to seek out private mortgage insurance, something that can be difficult to obtain, especially when there are only a few insurers in Canada that provide it. This, along with the current high prices on homes, both mean that buyers are facing a tougher time on the market than ever. However, these stats from the CMHC won’t push home prices higher in and of itself.
That’s what the CMHC said when asked if the rationing of insurance would affect home prices. However it shouldn’t, as sellers really have little to do with the mortgage insurance process when a buyer doesn’t have enough of a down payment; but it will definitely affect buyers who are trying to save up for the already-high home prices.
This could have the same effect that those calling on the government to tighten mortgage rules want to see. It will simply make it a little more difficult to obtain a mortgage, and that’s all TD’s Craig Alexander and Queen’s professor Louis Gagnon wanted to see any way. These were two financial experts that have been most vocal about wanting the Finance Minister to impose even more mortgage rules and CMHC’s rationing might just give them what they want.
