Canada Mortgage and Housing Corporation (CMHC) will start charging higher premiums for their mortgage insurances this spring. The new rules take effect on March 17.
In Canada, if you want to buy a house and can’t provide a 20% down payment, you are obliged to pay for a mortgage insurance. However, it’s not homeowners who benefit from it. It’s the lenders. This insurance protects the lenders in case of a mortgage default.
The size of the premiums is based on the amount of your loan and the down payment you provide.
According to a mortgage comparison website RateHub.ca, in such expensive cities as Toronto with its average home price of $730,472, a borrower with only 10% down will have to borrow $682,425 in order to purchase a property in this market.
According to the Canadian Real Estate Association (CREA), home sales were up by 2.2% last month from November, showing a higher pace after an activity decline, caused by stricter mortgage rules.
The report says actual sales (not seasonally adjusted) fell by 5.0% from a year ago, while real estate prices rose by 14.2% during the same period.
December results offset about half of November’s decline, when sales reported the largest monthly drop in more than 4 years, following the implementation of new mortgage rules.
As you know, Canada has taken several measures on cooling the hottest real estate markets. And although most of them actually showed a cool down, double-digit price growth in Toronto supported the activity at the national market.
CREA expect this year’s resale activity to be weaker than in 2016, as we have stricter mortgage rules now.