If you are looking for a home, you may want to make your purchase this spring: The Canada Mortgage and Housing Corporation (CMHC) will be increasing their mortgage loans insurance premiums as of June 1.
Mortgage loan insurance helps protect lenders against mortgage default and enables consumers to purchase homes with a minimum down payment of 5% with interest rates comparable to those with a 20% down payment.
Mortgage loan insurance is typically required by lenders when homebuyers make a down payment of less than 20% of the purchase price.
“For the average Canadian homebuyer who has less than a 10% down payment, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on housing markets,” stated CMHC’s April 2 press release.
“As Canada’s authority on housing, we contribute to the stability of the housing market and financial system, provide support for Canadians in housing need, and offer objective housing research and advice to Canadian governments, consumers and the housing industry.”
CMHC is mandated to operate its mortgage loan insurance business on a commercial basis. The premiums and fees it collects and the investment income it earns cover related claims and other expenses while providing a reasonable rate of return on its capital holding target.
Kevin Lee, CEO of the Canadian Home Builders Association, said the increase in mortgage insurance premiums “is not a big dollar amount — but we’re concerned overall about so many measures affecting first-time homebuyers, especially at a time when home prices are rising, nationally.”
Affordability is a term that perennially overshadows housing issues, from planning discussions to building science, in official plan discussions, at housing advisory committee meetings and in political debates.
DRHBA President Victor Fiume said, “When the average citizen cannot afford the average home…there is a problem.”
Builders try to mitigate this problem by building a range of housing types from condos, to stacked towns, semi’s and various sizes of detached homes. Potential homebuyers do well to save up for their homes, as large down payments greatly help to reduce the cost of homes.
Durham Region is the most affordable housing market in the GTA, however prices are expected to increase.
If you bought a new home last year don’t forget to take advantage of the federal tax credits like the homebuyers amount and the GST/HST rebate.