Video: If you are in the market to buy a new home, it’s going to cost you a bit more starting in May. Mortgage insurance rates are going up an average of 15 percent. Darlene Heidemann reports.
The country’s government-backed national housing insurer is raising the monthly payment home buyers who require coverage will have to pay out on top of their mortgage payment. But not by much.
The Canada Mortgage and Housing Corp said Friday it’s raising premiums by about $5 a month for those requiring coverage, an amount that “is not expected to have a material impact on the housing market.”
With home prices continuing to rise sharply in big city markets — fuelled by the return of rock bottom interest rates — housing watchers were betting on the CMHC to take a more decisive move on Friday to cool things down.
All new home buyers who put down less than 20 per cent of the value of their house as a down payment are required to take CMHC insurance on their mortgage. In the event that the buyer cannot pay back their home loan, CMHC steps in to cover the balance owed to the bank.
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Effective May 1, the premiums those home buyers pay will increase by about 15 per cent, the CMHC says, an amount the agency says works out to about a $5 increase a month for “average” buyers.
With policy makers somewhat nervous about the amount of mortgages Ottawa (read: taxpayers) is backing through the CMHC, the national housing agency wants to raise the amount of money it’s holding by adding a few more dollars onto every mortgage it insures going forward.
“The higher premiums reflect CMHC’s higher capital targets,” Steven Mennill, the CMHC’s vice-president of insurance operations, said in a statement.
“CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.”
Policy makers including the Bank of Canada, however, suggest the market continues to glide toward a soft landing after years of surging home prices and sales activity.