It’s about to get more expensive to get a mortgage.
The Canada Mortgage and Housing Corporation (CMHC) announced yesterday that the cost to insure a mortgage against default will go up, especially for those who put down less than 20%.
Today’s premium for a homeowner with 20% down is 1.25%. That will increase to 2.4%, a huge bump.
Things won’t be quite so bad for folks with 15% down, who will go from paying 1.8% to 2.8%. Premiums will increase from 2.4% to 3.1% for those with 10% down, and homeowners who only put down the 5% minimum will shell out 4% of the value of the property in mortgage default insurance premiums, up from 3.6%.
Premiums have also increased for borrowers who put up more than the 20% recommended down payment. Somebody with 25% down will pay 1.7% versus 0.7% before. The premiums for anyone putting down between 25% and 35% will stay the same at 0.6%.
CMHC revealed the main reason for the hikes in a conference call with reporters. The Office of the Superintendent of Financial Institutions previously announced stricter capital requirements for Canadian financial companies in 2017. This includes mortgage default insurers.
Some people are saying higher premiums won’t really impact anybody, since they have nothing to do with affordability ratios. Many mortgage brokers disagree, with some saying the new premiums create further incentive for potential first-time buyers to rent instead of buy.
The bottom line? It will cost more to finance a house come March 17. We just don’t know if it’ll really make a difference to markets like Toronto or Vancouver.
