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, as CMHC hiked its premiums from 2.75 per cent to 3.15 per cent last year.
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).”