CMHC insurance increases not as 'insignificant' as believed

by Olivia D'Orazio06 Apr 2015
The Canada Mortgage and Housing Corp. announced it will increase insurance premiums for those homeowners with less than 10 per cent down and players expect the move to impact one type of client in particular.
 
“CMHC completed a detailed review of its mortgage loan insurance premiums and examined the performance of the various sub-segments of its portfolio,” said Steven Mennill, CMHC’s senior vice president of insurance. “The premium increase for homebuyers with less than a 10 per cent down payment reflects CMHC’s target capital requirements which were increased in mid-2014.”
 
This is the second such move in two years. CMHC hiked its premiums from 2.75 per cent to 3.15 per cent in 2014.
 
Effective June 1, the insurance premium will rise 45 basis points to 3.6 per cent for those mortgages with less than a 10 per cent down payment. The housing authority said the move, announced late last week, will only add about $5 per monthly payment.
 
As such, CHMC said it does not expect the increase to have a material impact on the housing market.
 
But that is not a sentiment that’s shared across the country.
 
“It most certainly will; especially first-time homebuyers,” says Ron Hollett, an agent in Dartmouth, N.S. “When it’s your first time buying a home, you’re trying to save every dollar and then there are more fees.”
 
Hollett says the increased insurance rate will then have a domino effect on the market, making it more difficult for homeowners to sell and move up.
 
For now, though, he’s telling his clients to work hard to make the down-payment cut-off and realize the benefits of homeownership.
 
“If they can do it, go without the CMHC fees,” he says. “See if they can get money from another source, like family. Never the less, we’ll have to work with (the fee increases).”
 

COMMENTS

  • by 4/6/2015 12:00:03 PM

    THE USUAL ILLOGICAL CHARACTERISTIC OF OUR AMAZING SYSTEM , THOSE THAT CAN'T AFFORD MORE THEN 5 % DOWN SHOULD BE PUNISHED TO PAY MORE ,NO WONDER THE SYSTEM OF THIS INTELLIGENT LOGIC DOES NOT WORK ,MAYBE MY STATEMENT ITS KIND OF POLITICAL ,BUT ITS THE TRUTH ,HOW CAN SALES GO UP WHEN WE EXCLUDE THE BIGGEST MARKET ? THE FIRST TIME BUYERS ; FIRST THE LATE MINISTER OF FINANCE BRINGS THE AMORTIZATION PERIOD FROM 40 YEARS TO 25 AND AS YOU KNOW THE RESULT ,IT MAKES IT A LARGER PAYMENT THAT AVERAGE PEOPLE CAN'T AFFORD A HOUSE ,NOW THEY CMHC INCREASES THE RATE OF THEIR INSURANCE PREMIUMS , SO THE RESULT IS THAT 8 OUT OF 10 OF MY SALES DO NOT FINALLY QUALIFY FOR A MORTGAGE , TOTALLY GREAT FOR THE ECONOMY ??????

  • by Jason 4/6/2015 12:09:44 PM

    If you think an extra $5 a month isn't affordable then where do you expect people to get an extra 15% from?

    However, I don't think an extra $5 per month is that unaffordable. It's the "latte factor". I'm not saying that I agree with the CHMC hike but if you can't afford an extra $5 a month then you probably can't afford home ownership anyway.

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