Canada modifies mortgage insurance rules

Tuesday, December 15, 2015

On Dec. 11, Finance Minister Bill Morneau announced changes to the rules for government-backed mortgage insurance in order to contain risks in the housing market, reduce taxpayer exposure and support long-term stability. The changes will go into effect on Feb. 15, 2016, and will include an increase in the minimum down payment for new insured mortgages from five per cent to 10 per cent for the portion of the house price that is above $500,000. The five per cent minimum down payment for properties under $500,000 remains unchanged.

This move represents a graduated approach to increasing the down payment requirement proportionally to the cost of a home. Canadians that already have mortgages will not be affected by these changes.

“The Government’s role in housing is to set and maintain a framework that is equitable, stable and sustainable. The actions taken today prudently address emerging vulnerabilities in certain housing markets, while not overburdening other regions. They also rebalance government support for the housing sector to promote long-term stability and balanced economic growth,” said Minister Morneau in a press release. “This measure will increase homeowner equity, which plays a key role in maintaining a stable and secure housing market and economy over the long term. It also protects all homeowners, including many middle-class citizens whose greatest investment is in their homes.”

The government says it continuously monitors the housing market and is committed to implementing policy measures to maintain a healthy, competitive and stable housing market. A key part of maintaining a stable and secure housing market is higher homeowner equity.

Minister Morneau also emphasized the increases in guarantee fees for Canada Mortgage and Housing Corporation (CMHC)-sponsored securitization programs, announced by CMHC on Dec. 11.

The Office of the Superintendent of Financial Institutions has also announced its plans to update regulatory capital requirements for home mortgages to ensure that they are keeping pace with market developments and risks. Together, the government hopes these actions will strengthen Canada’s housing finance system, promoting long-term stability and balanced economic growth.

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