OTTAWA (Reuters) - The already low rate of arrears on mortgages insured by the Canada Mortgage and Housing Corp (CMHC) declined further in the second quarter, an indicator which might temper concerns about a possible hard landing for the housing sector.
The government agency said in its quarterly financial report that the arrears rate had declined to 0.32 percent as of the end of June, down from 0.35 percent both at the end of 2012 and at the end of March.
Canada did not suffer the housing crisis that triggered the 2007-2009 recession in the United States, and its government has taken steps to try to cool the Canadian market without causing a crash.
The total amount of insurance CMHC had on loans was C$562.1 billion ($535.3 billion) at the end of June, just C$500 million less than the end of March and comfortably under the C$600 billion ceiling set by the government.
The amount of insurance it wrote during the second quarter was C$20.8 billion, slightly up from the C$19.5 billion of the second quarter of 2012.
The main factor in the increase was a 232-percent jump from a year earlier in portfolio insurance, which covers portfolios of mortgages. This was due to a combination of temporary changes and year-over-year comparisons.
Early in 2012, CMHC reduced access to portfolio insurance through an allocation process, helping return volumes to those of prior to the liquidity crisis. The second quarter of 2012 saw a significant reduction from the first quarter; by comparison the first quarter of 2013 were negligible, followed by a significant uptake in the second.
However, the portfolio allocation for 2013 as a whole is unchanged from 2012, and the variability for the year as a whole is expected to be minimal, it said.
Partly countering the second-quarter rise in portfolio insurance was a 16-percent decline in home owner purchase volumes and a 60-percent drop in homeowner refinance volumes.
“The latest mortgage insurance parameter changes that took effect in July 2012 effectively eliminated refinancing at loan-to-value over 80 percent,” CMHC explained.
The report said the Insured Mortgage Purchase Program, introduced in 2008 as a way of countering the liquidity crisis, would generate an estimated C$2.5 billion in net revenues for the government by the time it ends in 2014-15.
The agency also said that on Friday it would announce how it would allocate the remainder of the C$85 billion limit that Finance Minister Jim Flaherty has set for guaranteeing new mortgage-backed securities for 2013.
From January through July, it backed C$66 billion in mortgage-backed securities and as an interim measure it put a C$350 million ceiling on the amount of new securities each issuer could issue during August.
On Friday, the last market day of the month, the CMHC will see how much uptake there has been during August and spokesman Peter de Barros said it will release the new methodology for allocating the rest of the C$85 billion later that day.
Additional reporting by Louise Egan