This past week Canada Mortgage and Housing (CMHC) backtracked on an unpopular policy move they made at the start of the pandemic last year. They tightened underwriting guidelines to limit debt service ratio’s for insured mortgages to 35/42% of GDS/TDS. This is because last year CMHC incorrectly estimated that the pandemic would cause a softening in the housing market. What happened was exactly the opposite. Instead of home values dropping by up to 18-20% they increased by the amount that they thought we were going to lose.
The other two insurers Canada Guranty and Sagen ( previously know as Genworth) who normally follow in lock step with whatever CMHC decides to do decided to keep their policy the same and allow for ratios up to 39/44. So what happened is that they ( Canada Guranty & Sagen) had a rapid … Read more