(Adds details throughout)
By Fergal Smith
TORONTO, March 26 (Reuters) - Canada is tripling the size of its Insured Mortgage Purchase Program (IMPP) in an effort to bolster funding for banks and mortgage lenders dealing with tightening in credit markets due to the economic impact of the coronavirus outbreak.
The amount of insured mortgage pools that the Canadian government stands ready to purchase is being increased to C$150 billion from C$50 billion announced earlier this month, the Canada Mortgage and Housing Corporation (CMHC) said.
The purchase of mortgage securities will expand funding for lenders in the hope that money keeps flowing to consumers and businesses.
“They’re hitting stubborn mortgage spreads with a bigger hammer,” said Derek Holt, vice president of capital markets economics at Scotiabank. “There is some evidence that mortgage spreads are welcoming the news today, but there is a lot of further room for improvement in market conditions.”
On Wednesday, Canada almost doubled the value of an aid package to C$52 billion to help people and businesses deal with losses from the coronavirus outbreak.
It has also approved C$55 billion in tax deferrals, while the Bank of Canada has cut interest rates by a total of 100 basis points this month and taken a series of measures to support the financial system.
CMHC also said it is ready to expand the issuance of Canada Mortgage Bonds, part of its standard mortgage-funding suite of products, to a total annual issuance amount of up to C$60 billion. (Reporting by Fergal Smith; Editing by Lisa Shumaker)