CMHC raises premiums

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CMHC is increasing its mortgage insurance premiums for homeowners and 1-4 unit rental properties effective May 1, 2014.

The change will only apply to mortgages underwritten after May 1, 2014 and it will apply to all homeowner business from that day forward as a result of increasing capital targets. Premiums will rise about 15 per cent, according to CMHC, though it isn’t expected to have a major effect on the housing market.

 “In 2013 the average CMHC insured loan at 95 per cent loan to value ratio was $248,000; using these figures a higher premium will result in an increase of approximately $5 to the monthly mortgage payment for the average Canadian homebuyer,” Peter De Barros, at CMHC ‘s executive director of communications said during the media conference call. “This is based on a five-year term using current mortgage rates and 25 year amortization. The premium increase is not expected to have a material impact on the housing market.”

CMHC also expressed its plans to make an announcement about its premiums – which are reviewed each year – in Q1 of every year going forward. The Crown Corporation has made a number of changes to its premiums; though this hike is the first increase since decreases between 2002/2003 and 2005/2006.

The increase was not a department of finance initiative, according to CMHC.

“Not in response to anything in particular although, certainly, the international and Canadian regulatory guidelines over the past years have trended to higher capital holding levels for mortgage insurers and obviously we are no exception to that,” Brian Nash, chief financial officer of CMHC told reporters.

It remains to be seen whether Canada’s two other insurers, Canada Guaranty and Genworth follow suit.

“I can’t comment on what they might do,” Steven Mennill, CMHC’s vice-president, insurance operations told reporters.

  • Bc broker on 2014-02-28 12:18:22 PM

    This is garbage.....

  • Micheal Gallant - Century 21 Infinity on 2014-02-28 12:20:49 PM

    Typical govt saying only $5 added monthly. First off who own their home for 25 years anymore and the average home is alot higher than 254k. Just spinning the numbers as usual!! I payed 11k in MHC insurance when I bought my home so what is a have it say 5 years. That's $2200 per year or $6 a day. They already make out like a bandit as it is and now they want to add on more fees to home buyers!! Basically using their low ball figures it would mean a $25 a month jump for the 5 year home owner of a low 250k mortgage.

  • Nick Hamblin on 2014-02-28 12:22:19 PM

    Agree with previous comment , when I cancel a home or auto insurance policy mid term I receive a rebate of my premiums for the remaining term as the risk as gone away , The default insurers should do the same maybe then they could justify a rate increase , they keep the premium even when the risk has been removed !!!

  • Omer Quenneville on 2014-02-28 12:32:31 PM

    On a $500,000 home with 5% down this works out to a tax increase(yes, this is a tax) of $2000. This will only impact those lease likely to afford a home. If we don't keep housing affordable for those that need it most, we will be finding ourselves having to carry these people (financially) to their grave. Treating all levels of the market (family home, investment and foreign investment) the same or equal is what is causing the imbalance. I truly believe anyone that wants to buy a home, or trade up to a bigger home should be exempt from these types of taxes any anyone that is buying strickly for investment should contribute more. We are digging ourselves into financial poverty as a society, a society that will have no choice but be dependent on the government…. maybe this is what they want.

  • john on 2014-02-28 12:58:40 PM

    fkn pricks

  • Anthony C. on 2014-02-28 1:24:18 PM

    @ John

    my sentiments exactly...but you might "offend" some of the tow-the-line types on this forum, with your articulate description of CMHC...

  • Ron Miller on 2014-02-28 1:40:59 PM

    @ john

    Brilliant response.

    No-one else needs to comment!

  • CanGal on 2014-02-28 1:52:57 PM

    How about just don't buy more than you can afford. 20% down no CMHC insurance no problem. Some of you seem to have not read the comment guidelines

    -Free from offensive language

  • Omer Quenneville on 2014-02-28 1:54:26 PM

    Well, they do say we get the government we deserve. I only know of one government that ever actually reduced government and spending.

  • Anthony C. on 2014-02-28 2:21:43 PM

    @ CanGal

    what about the offensive nature of the decision to increase premiums...isn't that the greater offense....?

    CMHC is profitable...has always been... so now they want to squeeze a little more profit from otherwise capable buyers who have demonstrated they can debt service, but otherwise don't have the 20% - 25% down for conventional financing because the price of homes are way out of whack with income and in relation to the dollar's buying power.

    I gotta ask CanGal, how many buyers, be they young, or 1st time buyers, or new to Canada, who are just plain hardworking folk (who CMHC was set up to service originally) and have 20% (averaging at $60K to above & beyond $80K)...? Not many and to squeeze them for a few shekels more is just plain wrong...

  • Leo Bradshaw on 2014-02-28 2:22:54 PM

    Taxes are rising and soon we will see more and more added on to housing due to Govts all over Canada not being able to reduce Debt. The middle class is the target so get ready for more to come.

  • CanGal on 2014-02-28 2:35:40 PM

    @Anthony - Comes back to buying more than you can afford. If you can't afford to save for the down payment, you shouldn't be buying a house. I will be buying my first home in my late forties because I waited until I could afford it with 20% down and worked darn hard for it.

  • Ron Miller on 2014-02-28 2:43:11 PM

    @ CanGal

    Great Job!!!

    One thing I do tell 1st time home buyers that cringe at CMHC costs... The average home increases in value 4% a year (Hamilton/Burlington). After the 1st year your CMHC costs are covered and you are gaining equity from there on in. So this way works for some people.

  • Lester Singh on 2014-02-28 2:44:19 PM

    As realtor in GtA average home prices are almost triple what CMHC is quoting and typically first time buyers move between 4 to 10 yrs.I suggest a refund in premiuns,and we are talking about a crown coporation here

  • Anthony C. on 2014-02-28 2:54:33 PM

    @ CanGal

    Good for should be proud of your accomplishment.

    But I gotta you agree or disagree with the idea of CMHC...?

    I for one do, yet I also believe there should be more skin in the game when it comes to the down, but CMHC does work well and should still support buyers (perhaps reduce the minimum D.P. to 10% or 15%)...but not at the expense of an unjustified premium increase....when the powers-to-be increase wages in line with the true cost of inflation, then it becomes a even playing field...until then, there are too few profiting from the many.

  • Blair Anderson on 2014-02-28 3:17:42 PM

    There is a better way... Please sign my petition

    and lets change the way mortgage default insuarnce is practiced in Canada once and for all.

  • Bob on 2014-02-28 4:15:45 PM

    Let's simply confirm and do the numbers using the amounts CMHC put forward in their press release. For 90% & 95% LVR insured mtgs, the pmt increase on a $248k mtg is $4.84 ($5.00+/- THAT'S CORRECT)
    However, at maturity of that 5yr term the outstanding mtg bal due to the increased insurance premium will be $852.79 higher. That amount spread out over 60 mths is $14.21 plus the extra $4.84 for a total increase of $19.05/mth ($19+/-)
    The real cost to the consumer is $19/mth not $5/mth. Pay it now or Pay it later, this money is still owed...

  • Dave , Broker on 2014-02-28 5:11:12 PM

    CMHC hikes are nothing, wait until Rogers Cable sends you this years increase :)

  • Omer Quenneville on 2014-02-28 6:25:19 PM

    Interesting when you look at the numbers. It would be better if they were to raise the downpayment to 8%, cost would be the same as the cmhc. Clearly not looking out for anyone, pure cash grab. I do have to say, I dont like any tax nor do I support anything that hurts the first regular home owner. If we must attack, it should be the foriegn investor.

  • Barb on 2014-02-28 8:02:51 PM

    CMHC is just jealous of the Big Banks making extra, BILLIONS in profit, this Quarter and on the backs of you and me. They thought they should get some of their own extras, since they cant just steal it, or expense it, like the Politicians and Senate do! They thought they would disguise it! as only $5:00 a month. When the real cost is $1,500.00 times 1-2-3 houses per person. $4,500.00 Just another huge Tax for the Poor who are the middle class to help the rich get richer. SO WRONG! We wonder why we are loosing the middle class!

  • Virge on 2014-03-03 11:56:03 AM

    CMHC will loose more business, other private lenders now could get into business to shut down the CMHC for good.

  • Dennis Paradis on 2014-03-05 4:38:51 PM

    First, my bias: I am a real estate agent who ikes working with first time homebuyers.

    Now my rant:
    CMHC say the change is no big deal as it it's only a 15% increase and it's justified because house prices are up. What's wrong with this picture?
    Why it's a big deal:
    1. The average of 15% masks the huge 40 basis points increase of premium for the two most likely brackets to be used by first time home buyers (5% & 10% downpayment brackets).
    2. The example they use ($150,000 loan) is misleading as the entry level in GTA is twice that for a 1 bed condo.
    3. They do not mention the fact that the extra premium is further taxed at 8% (PST) and that has to come out of scarce cash at closing (cannot be added to the mortgage).
    4. And speaking of adding to the mortgage, the extra premium on say a $300,000 house adds an ADDITIONAL $1,100 to the mortgage which when amortized over the life of an average mortgage triples the actual cost in interest paid.
    Why the house price excuse is a scam:
    1. Their premium is based on a % of the loan so they automatically get more premium dollars as house prices escalate. To suggest this was a justification for a higher premium is spurious at best.
    2. The only justification for most insurance companies is to say claims went up or they just wanted to make more profit. When have you ever heard any company admit the latter? Be nice if they did say this sometime as it's the honest aswer in most cases. as far as I know the default rate on owner-occupied homes in Canada has always been very low and has not changed much in a decade or more.
    Bottom line: This is a tax grab and they are hurting the most vulnerable sector in our economy - our first time homebuyers in the 25-35 year age bracket, among others. What a shame.

  • Ron Miller on 2014-03-05 4:44:11 PM

    I agree Dennis,

    When refinancing a home was reduced to max 80LTV the insurers lost a lot of income.

    They are taking it out on first time home buyers. Your right,, it is a shame.


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