Canada’s economy was affected in all sectors due to the COVID-19 pandemic, specially the housing sector. Plenty factors impacted negatively the housing market, including employees being laid off, unexpected business closures and a high decrease in immigration. Canada Mortgage and Housing Corporation anticipates a 9-18% drop in house prices for the next 12 months. CMHC has decided to change their underwriting policies for insured mortgages, in order to protect home buyers and reduce risks associated with this type of mortgage.
The new changes will take place in July 1st, and will affect new applications for homeowner transactional and portfolio mortgage insurance. The changes include a new minimum credit score of 680 to at least one borrower, restricting the GDS/ TDS to 35/42 and nonconventional sources of down payment that results in an increased debt will no longer be handled as equity for insurance purposes.
During this uncertain time, and in order to manage risks to insured business, CMHC decided to pause refinancing for multi-unit mortgage insurance. The exception applies if the funds are used for repairs or reinvestment in housing. In result, discussions begun around the change of multi-unit mortgage insurance products.
According to Evan Siddall, CMHC’s President and CEO, with the COVID-19 pandemic, many vulnerabilities that existed for a while were exposed in the financial markets, and it is necessary to take actions now and protect Canadians’ economic future. These actions are important in order to reduce government and taxpayer risks, and as well protect home buyers. These actions will help stabilize the housing markets by reducing unrestrained demands and untenable house price growth.
CMHC’s authorities’ decisions are under the National Housing Act, and they anticipate the potential house price adjustment. CMHC is committed to keep observing the market conditions and work with the federal government to detect potential risks in the policies.
The housing market and financial system stability is supported by CMHC, which is devoted to provide support to those Canadians that are in housing need, and also by offering advice and house research to all levels of Canadian government, consumers and the housing industry.
If you are looking to refinance or purchase a home over the next few months,contact us today at 877-296-2696 or email us by e-mail info@homemortgageadvice.ca.