The Cooperative Housing Federation of Canada saw one of its wishes granted with the release of the 2015 federal budget, although the requested leeway to refinance mortgages at lower interest rates won’t actually be in place for another fiscal year. Beginning in 2016-17, prepayment penalties will be cancelled on selected long-term, non-renewable loans that cooperative and non-profit housing providers carry with Canada Mortgage and Housing Corporation (CMHC).

This follows a similar move announced in the 2013 federal budget, but will broaden the scope of eligibility to include cooperative housing projects developed between 1973 and 1978. These projects typically have CMHC mortgages with 40- to 50-year terms at an interest rate of 8 per cent.

In its pre-budget submission to the Standing Committee on Finance last summer, the Cooperative Housing Federation cited the example of a 103-unit Toronto co-op that would face an $850,000 penalty to prepay the outstanding $2.2-million balance on its mortgage ending in 2027. Such harsh penalties undermine housing providers’ ability to take advantage of the current lower interest rates and obtain private sector refinancing that could be directed to needed capital upgrades.

“The elimination of prepayment fees will make a real difference to housing co-ops and the low-income households who make housing co-ops their home in communities across the country,” Nicholas Gazzard, executive director of the Cooperative Housing Federation, said in response to the budget announcement. “This is very good news.”