CMHC-insured mortgages nearly cut in half
December 5, 2017
Mortgages insured through Canada Mortgage and Housing Corp. (CMHC) plunged nearly 50 per cent in the past year, though national housing sales declined by just 4.2 per cent in the same period.
The gap was pronounced in the third quarter of 2017, when 480,000 homes sold as resales but the number CMHC-insured homebuyers dropped to 67,915, down from 127,991 in the same period a year earlier.
The percentage of buyers who opted for insurance from CMHC declined from 24 per cent to 14 per cent in the same period.
CMHC, Canada’s largest mortgage insurer, is blaming the 47 per cent decline in mortgages insured on the tougher mortgage regulations that were introduced in the fourth quarter of 2016.
These federal mortgage rules require all homebuyers with less than a 20 per cent down payment to undergo a stress test to ensure that, as borrowers, they could still service their loan should interest rates rise or their personal finances fall.
The Bank of Canada estimates that 10 per cent of potential buyers will not qualify for a mortgage under the new regulations.
CMHC, however, notes that it has seen an improvement in the quality of its mortgage loan insurance portfolio since last year.
The agency says its overall arrears rate was 0.30 per cent in the third quarter, down from 0.32 per cent a year earlier.
As well, the benchmark price of a Canadian home has increased 9.7 per cent, despite falling sales and more rigid mortgage controls, reports the Canadian Real Estate Association. The drop in the number of homebuyers insured with CMHC is expected to fall further in 2018, as even tougher mortgage regulations come into play on January 1 for all buyers.
Judging by the statistics, it appears that two tiers of Canadian homebuyers are emerging: a top tier that has the equity and income to survive tighter mortgage controls and higher prices and a lower tier of marginal first-time buyers along with others who are being squeezed out of the market.