Government again moves to slow market

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It may be that other shoe brokers have been waiting to drop, with CMHC announcing it will now limit each lender enrolled in its mortgage-backed securities program to $350 million in guarantees for August.

The Crown corporation says it will impose the limit for each lender on new guarantees in an effort to stay below its $85-billion ceiling. Brokers, among other channel players, are concerned the move will see lenders increase their mortgage rates to compensate for any increase in their own securitization costs or an associated drop in business.

Still, monolines able to stave off that kind of price hike could benefit from the CMHC decision, say analysts.

But brokers are already adopting a wait-and-see approach before deciding whether this latest move will further slow the market, which has only now started to rebound.

  • Ron Butler on 2013-08-07 7:23:29 AM

    There is some uncertainty which lenders will feel the impact the most. I think rates will rise slightly but the folks on the treasury / investor side of our lenders are pretty smart folks who will be looking for alternatives as the covered bond market seems more active recently (admittedly at slightly higher costs) and there will also likely be some variation from lender to lender depending on whether they can fund all their mortgages from their CMB allocation. Conversely many of the biggest mono-line players use Big 6 bank money and the Big 6 will definitely feel the effects of this change. It may take some time to find out how this change plays out. Realistically the era of incredibly low rates is likely transitioning to pretty low rates.

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