Canada’s national housing agency says new mortgage regulations introduced last fall decreased the size of the country’s insured mortgage market by about 33 per cent year-over-year in the second quarter.
The Canada Mortgage and Housing Corp says in its latest financial report that it provided mortgage loan insurance to 78,607 units in the three-month period ended June 30 compared to 117,463 units during the same period a year ago.
CMHC says volumes decreased largely as a result of the new regulations announced by the federal government in the fourth quarter of 2016.
The mortgage rules require all home buyers with less than a 20 percent down payment to undergo a stress test to ensure the borrower can still service their loan should interest rates rise. Borrowers must now qualify based on the Bank of Canada five-year posted rate, now 4.84 per cent, as opposed to the lower rate on their contract. This cut into the purchasing power of some first-time homebuyers.
CMHC said it continues to see an improvement in the quality of its mortgage loan insurance portfolio, which was 0.29 per cent overall in the second quarter. It said during the first half of 2017, the typical CHMC insured homebuyer had an average mortgage of $255,014 with an average credit score of 752.
The average gross debt service (GDS) and total debt service (TDS) ratios were 26.7 per cent and 36.5 per cent respectively. As of June 30, 2017, CMHC’s total insurance in force was $496 billion, below its legislated insurance in force limit of $600 billion.
Net income for the second quarter was $397 million and, based on the continued strength in the sector, the decision was made by CMHC’s board to issue the $240 million dividend payable to its shareholder, the government of Canada.