The annual State of Homebuying in Canada report noted that 56% of all purchasers were first time buyers in 2018. This dropped to 47% in 2019.
The tightening of mortgage rules which has been taking place over the last 4 years is certainly having an effect. The never ending rule changes were intended to slow home sales and prices. But like most government interventions, its had the opposite effect.
We’ve all heard the saying ‘necessary evil’ – something that we need or must have but don’t necessary like. It’s kind of like taking cough syrup that doesn’t taste so good but you know you need it to feel better.
Default mortgage insurance is a necessary evil. Without it, we wouldn’t be able to buy a home with less than a 20% down payment with low interest rates.
But what if you bought a house, paid the CMHC, Genworth or Canada Guaranty insurance… and a few years later you bought a bigger home or refinanced your mortgage for some home renos or debt consolidation?
Do you have to pay mortgage insurance again? If so, how much will this cost?
Rental vacancies are ridiculously low and demand for rental units is high… and growing!
That’s just a sampling of the opportunistic real estate investment news Ted Tsiakopoulos, CMHC’s Regional Economist for Ontario, shared recently at the Canadian Mortgage Brokers’ Association (CMBA) of Ontario annual conference.
Here are other main takeaways:
Strong 2017 economy helped ease imbalances
Sales and new home starts expected to slow
Prices to grow moderately
Eastern & Western Ontario will outperform Southern Ontario
Mortgage delinquencies remain at record lows – much lower than credit card or car loan debt
This is not a recording. CMHC is increasing their premiums for the 3rd time in 4 years. Here’s what it will look like.
Standard Premium (Current)
Standard Premium (Effective March 17, 2017)
Up to and including 65%
Up to and including 75%
Up to and including 80%
Up to and including 85%
Up to and including 90%
Up to and including 95%
90.01% to 95% – Non-Traditional Down Payment
Wondering why they need to increase the premiums? It’s not about trying to discourage homebuyers. It’s to “preserve the returns on capital”, according to Steven Mennill, SVP CMHC. Yup, the Crown corporation wants to focus on profit. (show me the money). At least they’re being honest about it. The overall amount of mortgages insured by CMHC has dropped in the past 4 years. Down from $576billion to around $512billion. So, it’s about maintaining profits while their book of business is shrinking.
Having said that, CMHC has lowered, increased and lowered their insurance premiums before. We can expect them to change and adjust again.
In case you are wondering why the overall volume is going down when house prices are going up, it’s because the Fed govt has changed the mortgage rules so that it becomes more difficult to qualify for a mortgage. Therefore, the amount of mortgages CMHC can insure is going down.
Now for some good news..
The overall cost to your mortgage is minimal. Oh yeah, one more thing…without CMHC, we would all be digging deeper into our pockets to come up with 20% or 25% down, like the old days. And while some may think that is how it should be, those days are long gone. First time homebuyers don’t have $100k, or $200k sitting around to buy a home. They need help.. And what’s wrong with helping our youth that are ambitious enough to want to own a home?
CMHC is a necessary evil.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
CMHC’s economists have 3 categories of measurement that are of concern. Overheating, Price acceleration and Overvaluation.
VANCOUVER AND TORONTO
The Vancouver market had already been identified by CMHC as having moderate Overheating and Price Acceleration and Strong Overvaluation. Toronto now has the same issues with the same Overall Assessment of Strong evidence of problematic conditions.