How recent CMHC changes affect Canadians

Over the past few years, the Canadian government has been taking several steps to encourage Canadians to reduce their outstanding debt. The main way the government's been doing this is by restricting mortgage availability and making mortgages more expensive. In August, CMHC announced a new policy which reflects the government's goal to reduce household debt. Unfortunately, this latest change may cause mortgage rates to rise yet again. Here's how this change came about. Earlier this year, Ottawa announced it was limiting the amount of mortgage-backed securities it would guarantee in 2013 to $85 billion. Mortgage-backed securities are pools of mortgages that lenders sell to investors. Since mortgage-backed securities are insured by CMHC, investors are willing to accept a lower rate of return, and lenders can pass on this lower rate to consumers in the form of lower mortgage rates. Canadians are so hungry for low mortgage rates, by the end of July lenders had already used up $66 billion of the $85 billion annual limit on mortgage-backed securities. This means lenders have to get through the rest of the year on a much reduced volume of low-cost lending funds. To make sure the remaining funds are shared equitably, CMHC is limiting each lender to $350 million worth of mortgage-backed securities per month. This means lenders suddenly have far less low-cost mortgage funds available to pass on to consumers. The good news for Canadians is that taxpayers are guaranteeing fewer mortgages and therefore exposed to less risk. But the bad news for homebuyers and people refinancing their mortgages is that longer-term mortgage rates are likely to start creeping up. If you're in the market for a mortgage or refinancing, give me a call. As a mortgage broker, I have access to lenders who are less likely to be affected by this latest change (such as credit unions), and I can provide you with professional advice to help make sure you and your family enjoy the most affordable financing possible. Kupina Mortgage Team | www.kupinamortgage.com