The cost of mortgage default insurance is about to undergo significant increases for most consumers after competitors moved quickly to follow the CMHC's decision to raise premiums, reports the Financial Post.
The government-run agency announced on Friday, Feb. 28 that it is increasing premiums in all areas, effective May 1. Existing homeowners are exempt from the changes, and the move will raise up to $175-million for the CMHC.
“The higher premiums reflect CMHC’s higher capital targets,” Steven Mennill, vice-president of insurance operations for the CMHC said in a release. “CMHC's capital holdings reduce Canadian taxpayers’ exposure to the housing market and contribute to the long-term stability of the financial system.”
In a conference call held with nationwide media outlets, the CMHC said that the premimum changes whould cost the average Canadian about $5 per month on their mortgage.
Canadians are required to obtain mortgage default insurance if they purchase a home with a down payment of under 20 per cent, and are borrowing from a financial institution. The insurance covers the banks in case of default and is backed by the federal government. There is close to $1 trillion backed by Ottawa, including support from private players.
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