CMHC Reports Canada’s Housing Market on the Upswing

Despite a recent slump in the Canadian housing market, CMHC (Canada Mortgage and Housing Corp) reports that home purchases will shift into an uptick in July and continue through August. The market had issues earlier this year, and many analysts and Canada mortgage brokers saw a decrease in home sales throughout Canada. Here we’ll talk about what this all means and if something really will pan out.

What is PMI?

PMI or private mortgage insurance covers the lender if the borrower defaults; there are many providers of PMI, but CMHC is the largest taxpayer backed corporation that guarantees mortgage insurance. They have a wide array of economists that keep tabs on how inflation (and disinflation) are affecting the market.

If a borrower has less than 20% of the down payment needed to buy a home, they will almost always have to go the private mortgage insurance route. This way if something happens the lender is able to recoup their losses and won’t have to worry about being stuck with a bundle of debt and a home that may not sell. Once a borrower achieves 20% equity or more in their home they’ll be able to cancel the PMI payment; the payment is usually 1% of the home’s value each month.

Why is CMHC so Optimistic?

CMHC sees home sales trending upwards. With Canadians on average having higher credit scores at signing – even if they do happen to need PMI or help with their down payment – is a great sign. More and more Canadians are seeing buying a home as an investment, reversing a trend we saw earlier in the year of many Canadians putting off buying a home because of market worries.

Average Insured Mortgage at $140,000

The average insured mortgage is currently sitting around $140,000; this is down from $180,000 2 years ago. People are not only buying homes, but they’re paying them off much more quickly, creating demand and a healthier market for home sales.

Many analysts and Canada mortgage brokers credit this to easy access to credit. This is a reversal of the trend we saw to the south in the United States before their housing crash; credit access was tightened by financial institutions and people weren’t able to get access to equity or loans. Some credit this with the mortgage rules that were passed back in July 2012, others say that the markets are levelling out in general.

Canadians Credit Scores Climbing High

And it’s not just the credit scores climbing high either – Canadians today are seeing mortgage acceptance rates 7 times out of 9 – a huge leap when compared with 5 or even 10 years ago. Most Canada mortgage brokers agree that a FICO score of 600 is necessary to get a mortgage that works for most borrowers; most Canadians applying for mortgages today hold a FICO score of 700 or more.

With the housing market recovering from its slump earlier this year, investors and buyers alike should rejoice – but caution is warranted. No one knows how the future Fed changes to their quantitative easement programme will affect the Canadian markets; a hopeful optimism never hurt anyone though!

Danny Papadopoulos is an experienced agent of Mortgage Central and an avid blogger for Homebase Mortgages. HBM is a Toronto mortgage broker that provides home mortgages, mortgages for the self-employed, home equity loans and lines of credit, debt consolidation, private mortgage and second mortgage lending. You can visit their website at http://www.homebasemortgages.ca/