CMHC to boost premiums for high-risk home buyers
Canada Mortgage and Housing Corporation is hiking premiums for mortgage insurance on its highest-risk borrowers.
Home buyers who put down less than 10 per cent down payment will see their insurance premiums jump 15 per cent starting in June. The increases only affect borrowers who are taking out new mortgages.
CMHC said the increases come after the Crown corporation raised its target capital requirements last August from 200 per cent to 220 per cent of the minimum requirements set by the Office of the Superintendent of Financial Institutions.
According to 2014 figures, borrowers who bought homes with a down payment of just 5 per cent typically took on about $252,000 in mortgage debt, the housing agency said, and will see premiums rise by $5 a month.
The changes are “not expected to have a material impact on housing markets,” the organization said.
The new rate for a loan-to-value ratio up to 95 per cent is 3.6 per cent, up from 3.15 per cent. For a loan-to-value ratio from 90.01 to 95 per cent, but a non-traditional down payment, the premium climbs to 3.85 per cent from 3.35 per cent.
“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, 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.”
The federal agency is the country’s largest insurer of home mortgages.
Financial institutions generally require mortgage loan insurance for buyers making a down payment of less than 20 per cent.
The insurance protects the lenders from defaults, but the costs usually are borne by the borrowers.
Home buyers who put down less than 10 per cent down payment will see their insurance premiums jump 15 per cent starting in June. The increases only affect borrowers who are taking out new mortgages.
CMHC said the increases come after the Crown corporation raised its target capital requirements last August from 200 per cent to 220 per cent of the minimum requirements set by the Office of the Superintendent of Financial Institutions.
According to 2014 figures, borrowers who bought homes with a down payment of just 5 per cent typically took on about $252,000 in mortgage debt, the housing agency said, and will see premiums rise by $5 a month.
The changes are “not expected to have a material impact on housing markets,” the organization said.
The new rate for a loan-to-value ratio up to 95 per cent is 3.6 per cent, up from 3.15 per cent. For a loan-to-value ratio from 90.01 to 95 per cent, but a non-traditional down payment, the premium climbs to 3.85 per cent from 3.35 per cent.
“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, 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.”
The federal agency is the country’s largest insurer of home mortgages.
Financial institutions generally require mortgage loan insurance for buyers making a down payment of less than 20 per cent.
The insurance protects the lenders from defaults, but the costs usually are borne by the borrowers.
No comments:
Post a Comment