The Repercussions
Canadian Mortgage Trends
The new mortgage insurance rules were intended to affect “less than 5% of new home purchasers.” That was Finance Minister Jim Flaherty's estimate from last June.
So far, he’s been pretty close to the mark. In the three months ending September 30, CMHC’s insured-purchase volumes are down 6%. (That drop isn’t due entirely to the rule changes, however.)
What Flaherty did not publicly predict was the extent to which high-ratio refinances, conventional securitized mortgages and smaller lenders would be impacted by Ottawa’s changes.
To start with, CMHC-insured high-ratio refinances (those with less than 20% equity) have plunged 22% Y/Y. CMHC attributes this to government policies that “effectively eliminated the high-ratio refinance market.”
On top of that, CMHC says its “portfolio (insurance…a.k.a. bulk insurance) volumes were approximately 98% lower” in Q3. That’s a direct result of it limiting “access to its portfolio product.”
That’s had noticeable effects on small lenders. According to one executive we spoke with, lenders like his can buy only 20-30% of the CMHC bulk insurance it could purchase just one year ago. And the big banks are also restricted, having been capped at $1 billion annually. Compare that to the $17 billion worth that Scotiabank bought last December alone. (More on why this matters) ...
