Globe & Mail sources report that Genworth and Canada Guaranty are encouraging the Canadian government to raise CMHC premiums. What effect will this have on clients and the brokering industry as a whole? Not much, says one player.
“If the premiums were to increase I don’t think it would change the client’s mind about getting a mortgage,” Sundeep Saggu of Verico the Mortgage Wizards told MortgageBrokerNews.ca. “If the premiums are raised they won’t really deter buyers because it gets tacked onto the mortgage and the premium is spread out.”
If CMHC were to increase its premiums, Canada’s two private lenders would likely follow suit as they essentially use the Crown Corporations as a benchmark. The result could price certain buyers out of the market and effectively pump the brakes on the housing industry.
Not necessarily the case, according to Saggu.
Because a mortgage, and the necessary mortgage insurance, is paid out over such a long term – often over a period of 25 years – clients won’t fully grasp the repercussions of having to pay an extra $10,000 or so over the period, argues Saggu.
“The implication of the premium doesn’t get properly translated to clients,” he said. “People are still going to want to move into their home – an extra half per cent on the premium won’t make a dent in their pocket.”
Though he does recognize the opportunity it would open up for mortgage brokers to take on more of an advisory role for their clients, by laying out exactly how much is paid for insurance over the term. And if taking out mortgage insurance is the right fit for them.
“If they do increase it will encourage brokers to take a different path and become more of a planner; It will take more planning than just sticking clients with a mortgage to get them into a house,” Saggu said. “It’s like anything: If bottled water was raised to $2.00 people would still buy it if they understand why they want it.”