Canada Housing Cuts Insurance for 2nd Homes, Some Self-EmployedTheophilos Argitis
Canada’s housing agency is further tightening the availability of mortgage insurance as part of efforts to reduce the risks of a sharp decline in prices.
As of May 30, people purchasing a second home or those who are self-employed and can’t provide third-party proof of income won’t be eligible for Canada Mortgage & Housing Agency insurance, the group said today in a statement from Ottawa.
Policy makers have been tightening rules that govern mortgage lending amid concern the balance sheet of the federal agency that backstops home loans has grown too large. Banks have been reducing mortgage rates in an effort to drum up business, prompting Finance Minister Joe Oliver last month to pledge to continue lowering potential risks to taxpayers of a downturn in the housing market.
The value of CMHC-insured loans has almost doubled since the end of 2006.
“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system,” Steven Mennill, the agency’s senior vice-president for insurance, said in the statement. “As part of the review of its mortgage loan insurance business, CMHC is evaluating its products and services to ensure they are aligned with these objectives.”
In February, the agency said it will increase premiums on mortgage insurance by an average of 15 percent. The government has also put a C$600 billion ($544 billion) cap on the agency’s insurance portfolio.
The products being restricted account for less than 3 percent of the Ottawa-based agency’s insured business volumes, CMHC said today in the statement, adding the changes aren’t “expected to have a material impact on the housing market.”
People who are self-employed can still get mortgage insurance with income validated through traditional methods, such as tax-office assessments or audited financial statements, CMHC said.