CMHC increasing mortgage insurance premiums for small down payments

A new survey suggests Canadian homeowners are making cutbacks to afford their mortgages.

OTTAWA -- Canada Mortgage and Housing Corp. is raising mortgage insurance premiums for homebuyers with less than a 10 per cent down payment by about 15 per cent, effective June 1.

Premiums for homebuyers with a down payment of 10 per cent or more and for CMHC's portfolio insurance and multi-unit insurance products are unchanged.

The changes do not apply to mortgages currently insured by CMHC.

CMHC says the increase follows an annual review of its insurance products and capital requirements.

It estimated that for the homebuyer who has less than a 10 per cent down payment and borrows $250,000, the higher premium will result in an increase of about $5.20 to the monthly mortgage payment.

The new rate for a loan-to-value ratio up to 95 per cent is 3.6 per cent, up from 3.15 per cent. For a loan-to-value ratio from 90.01 to 95 per cent, but a non-traditional down payment, the premium climbs to 3.85 per cent from 3.35 per cent.

"CMHC completed a detailed review of its mortgage loan insurance premiums and examined the performance of the various sub-segments of its portfolio," said Steven Mennill, CMHC's senior vice-president, insurance.

"The premium increase for homebuyers with less than a 10 per cent down payment reflects CMHC's target capital requirements which were increased in mid-2014."

The federal agency is the country's largest insurer of home mortgages.

Financial institutions generally require mortgage loan insurance for buyers making a down payment of less than 20 per cent.

The insurance protects the lenders from defaults, but the costs usually are borne by the borrowers.