CMHC Tightens Mortgage Borrowing Criteria

Recently, Canada’s housing agency has decided it will be implementing a series of measures aimed at high-risk mortgage borrowers, in order to supposedly stabilize housing markets due to the predicted housing price decline. However, the move is being met with criticism, as it could further hinder the economy’s recovery.

Canada Mortgage & Housing Corp (CMHC), which provides borrowers with home insurance and reduced down payments, has announced that beginning July 1 the eligibility criteria for home buyers will change significantly. Minimum qualifying credit scores are going to be increased from 600 to 680, meanwhile gross debt ratio is slated to decrease from 39% to 35%. Also part of the criteria adjustments, unsecured personal loans or unsecured lines of credit will no longer qualify as equity towards insurance. Going forward, the CMHC will no longer provide multi-unit mortgage insurance refinancing, unless the money goes towards housing reinvestment or repairs.

However, CMHC’s latest move is being met with criticism. According to Bank of Nova Scotia’s chief economist Jean-Francois Perrault, the timing couldn’t be worse. According to him, such a credit-restricting policy approach is unorthodox during a time of economic downturn. The path of the economy still remains cloudy, while the real estate market is weak and susceptible to volatility.

Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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