My take on CMHC capping High Ratio Mortgage Insurance

The big news in mortgages this week  is that all the lenders from my understanding are going to be capped at $350,000,000 per month for high ratio mortgage insurance backed by CMHC.  While it may seem like it is a lot of money, for some of the big banks they will go through it quickly.  It has been speculated that this will help to increase rates and slow down the housing market.  As lenders get closer to their capped amount it is possible that they will start to increase interest rates to slow down lending.  So... if you go to your bank and they are close to their cap for the month then you might find them offering rates a little higher then another bank or lender. 

So with this in mind it is my opinion that interest rates for mortgages will be cheaper at the beginning of the month when the lenders all have access to CMHC insurance.  If I was looking to lock in a rate I would do it at the beginning, possibly a week or so after the beginning to allow rates some time to possibly come down a little.  I think that you will start to see a wide range of interest rates offered by lenders in the coming months. 

Using a broker will give you the opportunity to use one of our many lenders.  The benefit to the clients is that you will have access to some lenders who may have yet to reach the cap of $350 million.  As a result we should have access to lower rates for our clients then the bank can offer.  It is my opinion that the banks are going reach the cap very quickly and will have to increase rates.  Also, many of our lenders use all 3 of the mortgage insurance companies, CMHC, Genworth and Canada Guaranty.  Most of the guidelines for these are similar to CMHC so there won't be any noticeable difference to the clients. 

I think another effect this will have on future home buyers is that some of the lenders may become picky about which clients are getting the best rates.  You may find that the lenders will offer discounted rates to borrowers with higher credit scores and so on.  You may start seeing a spread between what is called high ratio mortgages and conventional mortgages.  Basically, if you have 20% to put down on a house you may be able to get a better rate as it won't involve high ratio mortgage insurance at all. 

At the end of the day it is important to know that you don't need to figure out all of this.  A mortgage broker can make sure you are given the best option for you. 

For more information to refer to as to what CMHC is doing please follow the link. http://shawnmooney.blogspot.ca/2013/08/cmhc-attempts-to-cool-housing-market.html