CMHC to hike premiums for mortgage insurance
Insuring a loan through Canada Mortgage and Housing Corp. will soon leave home buyers with slightly less money in their pockets each month.
The federal agency announced a hike is coming to its premiums starting March 17.
Over the first nine months of 2016, the average CMHC-insured loan was about $245,000 and the average down payment was eight per cent, says CMHC. An average specific to the Calgary area was not available.
The coming increase will boost mortgage payments by about $5 each month for buyers with loans and down payments at those levels.
This calculation is based on a down payment of between five and 9.99 per cent, 25-year amortization and five-year term at 2.94 per cent.
On loans of $ 350,000 and $450,000, monthly payments will increase by about $7 and $8, respectively.
“We do not expect this increase in the CMHC insurance premium to factor into the buying decision for the majority of our prospective buyers,” says Kelly Halliday, business development manager for Brookfield Residential. “To date, we have not been hearing about this as a concern from our buyers. We have experienced a strong start to 2017, a trend we expect to continue through the spring market.”
Brookfield is currently in various stages of sales and construction on several multi-family developments, including its new apartment-style condo site Regatta in Auburn Bay.
Following the coming premium increase, buyers with down payments of between 10 and 14.9 per cent, and a five-year term at 2.94 per cent over a 25-year amortization, loans of $250,000 will see mortgage payments jump by about $8 each month, says CMHC.
For loans of $350,000, payments will increase by about $11.50 and buyers with $450,000 loans can tack on about $15 monthly.
The benchmark price on apartments sold through Calgary’s resale market in January, the most current available data, was $269,900, says the Calgary Real Estate Board.
For attached homes, a category where CREB combines activity for duplexes and townhomes, the benchmark price was $330,300.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” says Steven Mennill, CMHC’s senior vice-president, insurance. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”
But concerns reach past the current increase, says Kim O’Brien, co-chair of the steering committee for Calgary’s Community Housing Affordability Collective, which focuses on issues related to the cost of housing, including government policies.
“On its own, they’re small dollar amounts,” she says. “But the thing we would ask people to look at with this policy is its interconnectedness with some of the other policies that CMHC has put forward.”
Since mid- October, all buyers seeking high-ratio insured mortgages have needed to qualify for both their contract rate and the conventional five-year fixed posted rate through the Bank of Canada.
The Bank of Canada figure, generally higher than most contract rates, is the most common number advertised by the six largest banks in Canada.