According to the report, CMHC insured only 41,000 new mortgages between January and March 2017, a 41 per cent decrease compared to the first three months of 2016. Correspondingly, the collective value of these new insured mortgages was also lower than in 2016, adding up to $8.3 billion in 2017 compared to $14.3 billion the year before.
The decline in new insured mortgages is the result of last October’s new mortgage insurance rules, says CBC News. Under the new rules, borrowers must now pass a “stress test,” which determines whether or not they can afford to repay their mortgage if interest rates rise. Regardless of the interest rate offered by the mortgage company, CMHC calculates whether or not the borrower can afford to pay a five-year standard rate of 4.64 per cent.
CMHC says that their stress test policy is meant to make it harder for borrowers to get insurance. With the new regulations, borrowers will need to prove they can afford a higher mortgage payment or, if they forego insurance, will need to have a minimum down payment of 20 per cent.
According to the CHMC Quarterly Financial Report, the total number of amount insured by the organization is $502 billion, around 10 per cent lower than last year. CBC News expects this figure to continue declining as CMHC insures less mortgages due to the new mortgage insurance regulations.
CHMC is required by the federal government to stay below $600 billion worth of insured mortgages.