The effects of CMHC’s premium hike remain to be seen, but one industry expert believes it will not slow down the market.
“I think if you look at the average 15 per cent, they did the math there and they believe it will only affect the average homebuyer by about $5 a month on their monthly mortgage payments so I don’t think it’s going to greatly affect the housing market or prices or anything like that,” Kelvin Mangaroo, president of RateSupermarket.ca told MortgageBrokerNews.ca. “I think it is more about them getting in line, like they mentioned, about their capital reserves … adjusting their price because they haven’t adjusted it since 2005.”
Friday’s announcement -- that the crown corporation will be raising its premiums by about 15 per cent – followed much speculation from the media and industry players.
“The higher premiums reflect CMHC’s higher capital targets” Steven Mennill, CMHC’s vice-president of insurance operations said in the official release. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.”
For Mangaroo’s part, he believes the slight premium increases are exactly as CMHC says: a bid to adjust revenues in line with a housing market that has been heating up over the last number of years. And not, as some may believe, an attempt to slow the market.
“So you imagine the huge run-up in the housing market we’ve had in the past decade or so and they’ve been charging the same amount to insure all those mortgages so I think it’s really a reflection on that side of things; so getting the amount of capital they put away and the pricing right on that side versus anything to kind of slow down the market,” Mangaroo said. “I don’t think we’re going to have any huge impacts from a consumer perspective.”
Nevertheless, the announcement positions mortgage brokers to offer advice and counselling to potential clients who may be unsure about the impact the hiked rates will have on housing prices in the future.
“It’s definitely a great way for brokers to reach out and position themselves as that expert to their prospective customers and say, ‘FYI this news
has come out, this is how it could impact you, give me a call if you’ve got any questions,’” Mangaroo said. “It’s a great reason for brokers to reach out.”
CMHC raises premiums