Canada’s mortgage insurer to tighten rules

TORONTO — The government-backed Canada Mortgage and Housing Corp says it would tighten rules for offering mortgage insurance from July 1, after forecasting declines of between nine per cent and 18 per cent in home prices over the next 12 months.

The move would make it harder for riskier borrowers, who offer down payments of less than 20 per cent, to access CMHC’S default mortgage insurance.

CMHC is establishing a minimum credit score of 680 instead of the current 600, the group said in a statement.

It will also limit total gross debt servicing ratios to its standard requirement of 35 per cent of annual income, compared with a threshold as high as 39 per cent currently, and total debt servicing to 42 per cent versus as much as 44 per cent now.

The measures will help curtail “excessive demand and unsustainable house price growth,” CMHC chief executive Evan Siddall said.

He said COVID-19 has exposed longstanding financialmarket vulnerabilities, and “we must act now to protect the economic futures of Canadians.”

Some 35 per cent of Canadian banks’ mortgages are insured, their financial statements show. CMHC is the top mortgage insurer, while Genworth MI Canada and other private companies also provide similar products.

Despite evaporating activity in the housing market due to the COVID-19 pandemic, prices have continued to rise as listings have fallen off alongside demand.