The government-backed Canada Mortgage and Housing Corporation (CMHC) is tightening its rules for offering mortgage insurance starting July 1st. The move will effectively make it harder for higher risk borrowers, who offer less than 20% down payment, to access CMHC’s default mortgage insurance.
Specifically, CMHC will establish a minimum credit score of 680, up from the previously required 600. In addition, they will limit the total gross debt servicing ratios to its standard requirement of 35% of annual income, compared with a threshold as high as 39% currently, and a total debt servicing to 42% versus as much as 44% now.
The changes come amid the COVID-19 pandemic where after some months, the CMHC has forecasted declines of between 9% and 18% in home prices over the next 12 months.
We looked at the recent financial & economic developments in Canada, including the impacts of the #COVID19 pandemic. Check out the national highlights on the #housing market ⬇️ & learn more in the full report: https://t.co/AD4OLbe9YI pic.twitter.com/b8oeJoDG85
— CMHC (@CMHC_ca) May 27, 2020
CMHC Chief Executive Evan Siddall hoped that the measures would curtail “excessive demand and unsustainable house price growth,” in a statement. He went on to say that: “we must act now to protect the economic futures of Canadians.”
Some critics called the CMHC’s response a “dire prediction” or “fear mongering”. Siddall responded to those critics by Twitter on May 27th, 2020.
Here’s more on our house price outlook. Some vocal real estate advisors have labelled us “panic-inducing and irresponsible,’ saying essentially that house prices don’t go down. They’re whistling past the graveyard and offering no analysis. Here’s ours. You decide. https://t.co/LsHnLkiHVs
— Evan Siddall (@ewsiddall) May 28, 2020
In Windsor-Essex County we’ve seen the number of listings drop with the COVID-19 pandemic, while prices have continued to rise.
Learning more about how these rules can affect you in your own housing situation has never been more important. For instance, pre-approvals have been greatly affected by changes in the mortgage and real-estate markets recently.
In some situations, you might find yourself affected by these changes. In other cases, you might not be affected. Contact us to find out how you can ensure that your financial future is secure.
Tune in to AM800 tomorrow morning, June 6th, 2020 at 9am, to listen in to Rasha Ingratta and Vanessa Field speak with Angelo Aversa and listeners.