The Canada Mortgage and Housing Corp. has announced that starting March 17, it will be increasing the premiums on its insured loans, with the hike calculated based on down payments of between 5 and 9.99 per cent, 25-year amortization, and five-year term at 2.94 per cent.
Consumers who have locked into this kind of loan within the $245,000 average bracket should expect to see their payments grow by around $5 more monthly, the Calgary Herald reported.
Meanwhile, home owners with mortgages worth $350,000 and $450,000 will experience monthly payment increases of around $7 and $8, respectively.
CMHC officials assured that the changes will not prove to be a hindrance to market activity.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” CMHC senior vice-president for insurance Steven Mennill said. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”
And despite the impending increases, industry players remained unfazed.
“We do not expect this increase in the CMHC insurance premium to factor into the buying decision for the majority of our prospective buyers,” according to Kelly Halliday, business development manager for the Calgary-based firm Brookfield Residential.
“The government guarantee of mortgage insurance is intended to protect against severe risks that could threaten financial stability,” the Finance Department said at the time. “Lender risk sharing would aim to rebalance risk in the housing finance system by requiring lenders to bear a modest portion of loan losses on any insured mortgage that defaults, while maintaining sufficient government backing to support financial stability in a severe stress scenario and borrower access to mortgage financing.”