Mortgages make up 68 per cent of Canadian’s total debt, according to the CMHC’s Canadian Housing Observer 2011. That’s a total of $1.042 trillion we owe on our houses. CMHC insurance is required for anyone buying a home with less than 20 per cent down.
As a result the Canadian Mortgage and Housing Corporation (CMHC) has been insuring more mortgages to satisfy the appetite of Canadians wanting to buy bigger and more expensive homes. With interest rates at historic lows, money is cheap and this makes real estate very attractive.
In addition, banks are moving to take risk of their books and looking for insurance on loans that have higher ratios. It’s not required by law, but what it does is it securitizes these loans, gets them off the banks balance sheet and reduces their capital requirements. Banks are paying the insurance premiums to do this, but its worth it- for them.
For more information on why the CMHC is approaching this limit now, check out my interview with George Hugh, President of Taurus Mortgage Capital.
Read my full blog on ratesupermarket.ca, CMHC Approaching Limit A Warning To Homeowners.