Short Version
The latest CMHC news impacts new home buyers only – not current mortgage holders
The increase takes effect May 1, 2014
The net impact to the average BC Family purchasing with a 5% down payment is a $5.75 per month payment increase.
Based on the median BC Mortgage of ~$287,700 (assuming a 5% down-payment) the CMHC Premium built into the mortgage increases from $7,700.00 to $8,882.00
$1,182.00 is a meaningful amount of money for sure. However most will view it through the lens of the monthly payment impact which is nil.
This news will have neither a negative nor a positive impact on the market.
There remains one other insurer option (Canada Guaranty) for clients that, as yet, has not increased their mortgage insurance premiums…not yet anyways. The third and only other option, Genworth, chose to follow CMHC’s lead the same day.
This Broker will be requesting CG as insurer of choice for his clients as long as this price disparity exists.
Long Version
This is just too small of an issue to write a long story about.
$5.75 per month does not even qualify as a speed bump on the road to success for 99.99% of purchase transactions.
Will this news play a role in boosting the Spring Market with a rush to complete prior to May 1st? Unlikely.
Will it increase CMHC profits making them an even more stable Corporation than they already are? Perhaps, but most likely this news is in response to a December 2013 announcement regarding the Federal Government applying slightly higher costs to CMHC. Albeit with a wider profit margin based on original calculations.
And so we see consumer impacted by the trickledown effect as the increased cost is passed onto them….and then some.
Will Canada Guaranty increase their premiums to match those of CMHC and Genwroth? Or will they remain lower in an effort to win more mortgage volume?
Time will tell.
Until the third of the three insurers makes a move there is in fact an option of a $0.00 per mo. increase to purchases with less than 20% down.
Thank you.