Mortgage insurance premiums to rise by up to $15 a month

Mortgage insurance premiums to rise by up to $15 a month

Canada Mortgage and Housing Corp. is raising the cost of mortgage loan insurance effective March 17.


The Crown corporation estimates the increases will add about $5 to a monthly mortgage payment for its average Canadian homebuyer.


However, those with larger mortgages, like homeowners in the red-hot Toronto and Vancouver markets, will pay more. Borrowers with a $450,000 mortgage will pay about $8.47 more, while those with an $850,000 mortgage will pay almost $16 more.


CMHC says the changes reflect new regulatory requirements that came into effect on Jan. 1 that require mortgage insurers to hold additional capital.


The premiums are calculated based on the loan-to-value ratio of the mortgage being insured.

The size of the increase in rates depends on that ratio.


Lenders typically require mortgage loan insurance when a homebuyer makes a down payment of less than 20 per cent.

The cost can be paid in a single lump sum, but CMHC says the amount is often added to the mortgage principal and repaid over the life of the loan.


The premium hikes come amid concern about Canadians’ debt levels.

In November, the CMHC warned that interest rate hikes could cause an economic crisis, with overinflated house prices falling by as much as 30 per cent and unemployment rising.


And in December, the Bank of Canada warned that unsustainable debt levels posed a risk to the national economy.

The bank said at a national level the proportion of highly indebted borrowers with mortgage-to-income ratios above 450 per cent reached 18 per cent in the third quarter of 2016, up from 13 per cent two years earlier.

While Vancouver real estate prices eased after the introduction of a foreign buyers tax, they continue to soar elsewhere, with prices setting new records in the Greater Toronto Area and Victoria.


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