Following the annual review of its insurance products and capital requirements, CMHC will increase its mortgage loan insurance premiums for homeowner and 1 – 4 unit rental properties effective May 1, 2014. The increase applies to mortgage loan insurance premiums for owner occupied, self-employed and 1-to-4 unit rental properties, including low-ratio refinance premiums. This does not apply to mortgages currently insured by CMHC. CMHC’s capital management framework is consistent with international practices and Canadian guidelines for mortgage insurers. Increased capital targets are consistent with Canadian and international industry trends and makes the financial system more stable and resilient. “The higher premiums reflect CMHC’s higher capital targets” said Steven Mennill, CMHC’s Vice-President, Insurance Operations. “CMHC’s capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long term stability of the financial system.” For the average Canadian homebuyer requiring CMHC insured financing, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on the housing market. Effective May 1st, CMHC Purchase (owner occupied 1 – 4 unit) mortgage insurance premiums will increase by approximately 15%, on average, for all loan-to-value ranges. CMHC reviews its premiums on an annual basis and, going forward, plans to announce decisions on premiums in the first quarter of each year. The homeowner premium increase follows changes CMHC made to its portfolio insurance product earlier this year. As Canada’s national housing agency, CMHC draws on more than 65 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable housing solutions that will continue to create vibrant and healthy communities and cities across the country. For additional highlights please see attached backgrounder and key fact sheet. Information on this release: Charles Sauriol, Media Relations 613-748-2799 [email protected] TARA PERKINS (GLOBE & MAIL) – Royal Bank of Canada, the country’s largest mortgage lender, has quietly cut some of its mortgage rates this weekend. The move appears to be part of a broader dip in rates, although economists generally still expect an increase in 2014.
Five-year fixed mortgage rates rose industry-wide for much of 2013, from their low of 2.64 per cent in April to their high of 3.39 per cent in September, according to Alyssa Richard, the chief executive officer of RateHub.ca. They edged down a bit later in the fall but had generally been steady at around 3.25 per cent since then. RBC is now cutting its two-, three-, four– and five-year fixed mortgage rates each by 10 basis points. In an emailed statement, the bank said that some mortgage lenders have recently been pricing at lower rates, prompting it to move. Royal Bank is often a price leader when it comes to mortgages, and other big banks frequently follow suit after it changes its prices. Its five-year fixed mortgage rate is now 3.69 per cent. Mortgage prices tend to follow changes in five-year government bond yields because of the impact that those yields have on banks’ funding costs. The yield on five-year government of Canada bonds has fallen from 1.95 per cent on December 31st to 1.71 per cent on January 16th, according to Bank of Canada data, although it fluctuated during that time. Canadian bond yields tend to follow U.S. bond yields. Yields began rising last May after U.S. employment numbers came in much better than expected, raising hopes for the U.S. economy. Then they shot up further after U.S. Federal Reserve chairman Ben Bernanke suggested the central bank could start tapering its asset-buying program, a signal that he thought the economy’s health was improving. While the U.S. central bank has begun tapering, December jobs numbers and some other recent data have been disappointing, and caused bond yields to fall. Most economists still expect that both yields and mortgage rates will tick up gradually through 2014, as the U.S. economy improves and the central bank continues to back off of its asset-buying program, known as quantitative easing. But as Ms. Richard points out, it is possible that the U.S. economy will prove to be weaker than expected, and that could result in further decreases in bond yields and mortgage rates. Royal Bank of Canada, which normally issues a press release when it changes its mortgage rates, made this move quietly, simply posting the new rates on its site. The news was reported this weekend by the blog Canadian Mortgage Trends. Bank of Montreal dropped its five-year rate to 2.99 per cent early last year, spurring a price battle that angered Finance Minister Jim Flaherty. Mr. Flaherty has taken numerous steps, such as tightening the mortgage insurance rules, to prevent consumers from taking on too much mortgage debt. Policy-makers have been trying to warn consumers that, at some point, rates will rise. |
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