Starting March 17, the Canada Mortgage Housing Corporation (CMHC) is raising the cost of its mortgage insurance for homebuyers.
The hike will concern borrowers who need insurance, as they can’t provide a 20% down payment. This increase itself isn’t expected to have a strong impact on the market, but together with other strict changes, it tightens the conditions for potential borrowers.
The real hike in insurance premiums isn’t so large. It will be calculated based on the loan-to-value of the mortgage. In case of a $245,000 mortgage, the change will add minimum $5 to a monthly mortgage payment.
Canadian consumers hit another record in household debt level
In 2016, the total sum of Canadians’ debts compared with their incomes reached another record high mark.
According to Statistics Canada, the amount of household debt was up to 167.3% from the disposable income in the fourth quarter of the last year, following a 166.8% number, reached in Q3.
In other words, Canadian households owed $1.67 for each dollar they earned.
“After the growth slowed down to a stable pace at the end of 2013, the debt ratio started gaining the pace again amid sharp increases in the Vancouver and Toronto real estate markets,” - noted Robert Kavcic, BMO Capital Markets senior economist.
February 2017 – average house price in Canada went up by 3.5%
Last month, the average cost of a property in Canada rose by only 3.5% and reached $519,521, despite the ongoing upward pressure from the hot market of Toronto.
According to the Canadian Real Estate Association (CREA), representing realtors, the average price is still pushed up by strong sales activity in Greater Vancouver and Greater Toronto, which remain the most expensive real estate markets of Canada.
"It should be noted that Greater Vancouver's share of national sales was reduced sharply, lowering the pressure on the national average price," – CREA said.
In case we exclude the two cities from calculations, the cost of the typical Canadian home would go down by about $150,000 to $369,728.