OTTAWA (Reuters) - Canada’s housing agency said on Tuesday it will increase its homeowner mortgage loan insurance premiums in a move that makes it marginally more expensive for borrowers to buy a home but should not materially affect the housing market.
The move will add about C$5 to the average monthly mortgage payment, the Canada Mortgage and Housing Corporation said.
The slightly higher borrowing cost for new buyers comes after recent moves by the government to tighten mortgage lending rules in a bid to prevent homebuyers from taking on too much debt to get into Canada’s hot housing market. While some markets have cooled, Toronto, the largest, is still boiling, with bidding wars a common feature of the seller’s market.
“We do not expect the higher premiums to have a significant impact on the ability of Canadians to buy a home,” Steven Mennill, senior vice-president of insurance at CMHC, said in a statement. “Overall, the changes will preserve competition in the mortgage loan insurance industry and contribute to financial stability.”
The CMHC is the nation’s largest mortgage insurer. Buyers can purchase a home with a down payment as small as 5 percent of the purchase price, but insurance is typically required by lenders when the down payment is less than 20 percent.
During the first nine months of 2016, the average CMHC-insured loan was about C$245,000 and the average down payment was 8 percent, the agency said.
The mortgage insurance premium can be paid as a lump sum but is more often added to the mortgage principal and paid over the life of the loan as a part of the monthly payment.
Reporting by Andrea Hopkins; Editing by Andrea Ricci