‘High-risk’ borrowers hit by new rules

Number of new CMHC-insured mortgages drops following tightening of regulations


New mortgages insured by Canada Mortgage and Housing Corp. (CMHC) dropped by 44% following the introduction of new mortgage loan restrictions in October 2016.

In the last three months of 2016, CMHC insured 89,264 new mortgage applicants who were coming in with a 20% down payment or less and were considered “high-risk” borrowers.

But in the first quarter of 2017, after the mortgage regulations were toughened, CMHC insured just 46,874 new mortgages.

Through the first half of 2017, CMHC-insured mortgages had dropped to 95,000, down from 118,000 in the first half of 2016.

In October 2016, the federal government began a stress test for approving all high-ratio insured mortgages with terms of five years or more. It required such borrowers to prove they can handle payments at the Bank of Canada’s posted five-year rate, which is about twice as high as the lowest lending rates available.

CMHC said it continues to see an improvement in the quality of its mortgage loan insurance portfolio, which is reflected in the overall arrears rate of 0.29%.

During the first half of 2017 the average CHMC-insured homebuyer had a mortgage of $255,014 with an average credit score of 752.

At the end of the second half of this year, CMHC’s total insurance-in-force was $496 billion, below CMHC’s legislated insurance-in-force limit of $600 billion.