Apparently it’s not just the typical less than 20% down mortgage that the CMHC insures. They’re currently almost at their government mandated limit of $600 billion in default insurance because banks are buying up insurance to cover even low ratio loans (ie greater than 20% equity). This removes all risk from the lender, so why wouldn’t they do it? I didn’t even know this was permitted.
Normally, every 3-5 years as the mortgage market grows, CMHC has asked for, and received, approval from parliament to raise this limit. It was last raised by $150 billion in 2008.
Now media frenzy has politicians scurrying to offload mortgage risk from the government back to the private sector. (The government guarantees CMHC’s liabilities, so public concern is certainly understandable.)
As a result, many question whether CMHC will get its $600 billion limit raised anytime soon.
Here’s some reaction on that:
TD Bank economist Sonya Gulati tells CBC that not increasing the limit “may serve to tighten the housing market.”
RBC economist Robert Hogue told Global News that increasing the limit “…would be, policywise, a very delicate balance to strike.”
The Post quoted an unnamed industry source as saying: “…What will the government do, not increase (CMHC’s) limit? This could kill the entire housing market.”
Read the full article here.
