CMHC to stop insuring mortgages on million-dollar homes

CALGARY – Canada Mortgage and Housing Corp. says it will no longer offer mortgage insurance for homes that cost $1 million or more, starting July 31, even if the buyer has made a deposit of 20 per cent or more.

It also announced on Friday that it will no longer insure loans that are used to finance construction of multi-unit condominium projects, effective immediately.

“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system,” said Steven Mennill, senior vice-president of insurance, said in a statement. “The changes announced as part of the review ensure that CMHC’s products and services are aligned with these objectives.”

In Calgary, luxury home sales for the MLS market, for properties of more than $1 million, were 359 year-to-date until the end of May, representing three per cent of total sales activity. For the same period a year ago, there were 318 sales, still equating to three per cent of total sales.

Last year, a record was set with 727 MLS sales in the luxury bracket, representing 3.1 per cent of all residential sales in the city, according to the Calgary Real Estate Board.

“Consumers were already required to have 20 per cent down for million plus homes, and insurance was not required for these properties,” said Ann-Marie Lurie, chief economist with CREB. “However, some lending institutions would still buy insurance for these properties. The impact will ultimately depend on the banking industry and if they will adjust lending requirements given that the low-ratio insurance product is no longer available.

“This is still a fairly small portion of the market in Calgary, and at this point I would not expect any significant changes in sales to occur in our market.”

The share of properties over $1 million to total sales in the City of Calgary over the years include 2.57 per cent in 2012, 2.41 per cent in 2011, 2.12 per cent in 2010, 1.63 per cent in 2009, and 1.93 per cent in 2008.

Two years ago then federal finance minister Jim Flaherty announced that CMHC would stop insuring mortgages on homes worth $1 million or more if the buyer borrowed more than 80 per cent of the value.

CMHC said its mortgage loan insurance for condo buyers isn’t affected by the change in multi-unit condo construction.

“The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector through CMHC,” said the agency. “They also support the government’s continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance, as noted in Economic Action Plan 2014. They are not changes to the government’s mortgage loan insurance parameters and do not apply to private mortgage insurers’ products and services.”

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