The Canadian Press
Canadians looking to borrow money toย purchase a home are in for some extra challenges after the Canada Mortgage and Housing Corporation announced changes to its lending standards last week.
The countryโs national housing agency is increasing the qualifying credit scoreย for mortgage insurance to 680 from 600 and limiting gross and total debt servicing ratios to their standardsย ofย 35 per centย and 42 per cent, respectively.
โCOVID-19 has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,โ CMHC head Evan Siddall saidย in a statement.
โThese actions will protect homebuyers, reduce government and taxpayer risk and support the stability of housing markets while curtailing excessive demand and unsustainable house price growth.โ
Under the changes effective July 1, CMHCย will alsoย no longer treat non-traditional sources of down payment funding,ย such as a personal unsecured line of credit, as equity for insurance purposes.
Itย willย also suspend refinancing for most multi-unit mortgage insurance.
The move comes justย weeks after Siddall appeared before the Standing Committee on Finance in Ottawa to warn of trouble ahead for the housing market.
โOur support for home ownership cannot be unlimited,โ he said.
โHome ownership is like blood pressure: you can have too much of it. Housing demand is far easier to stimulate than supply and the result, as weโve seen, is Economics 101: ever-increasing prices.โ
The majority of mortgages insured by the CMHC buy gador xanax will not be affected by the more stringent qualifications.
In the fourth quarter of 2019, the average debt servicing ratios were well below the 35 per cent and 42 per cent thresholds, and depending on the metric, between 63% and 82% ofย all qualifying mortgagesย were below the limit.
Spokesperson Leonard Catling said the changes โwere not made because of our current book of mortgage insurance business, rather to maintain its integrity.
โHigh household indebtedness continues to be a concern and the COVID-19 pandemic has exposed the long-standing vulnerabilities in our financial markets.โ
The CMHCย forecasts a declineย of betweenย nine per cent and 18 per cent inย average house prices over the next year because of higher mortgage debt and increased unemployment.
Siddall warned the finance committee aย growing debt deferral cliff could be headed Canadaโs way in the fall, when some jobless Canadiansย will need to start paying their mortgages again after deferrals run out, and asย much as one-fifth of all mortgages could be in arrears ifย the economy has not recovered sufficiently, he warned.
โWe need to avoid exposing young people and through CMHC, Canadian taxpayers to the amplified losses that result from falling house prices,โ he said.
โUnless we act, a first-time homebuyer purchasing a $300,000 home with a 5 per cent down payment stands to lose over $45,000 on their $15,000 investment if prices fall by 10 per cent,โ he said.