Amidst the hustle and bustle of everyday life, whispers are being heard of Canada’s mortgage cap reaching an all time high and concern rises of Canada’s economy that’s hanging in the balance.
With mortgage rates at an all time low, such as Dominion Lending Center reflecting 3.25% on a five year term, home owners have taken on substantial household debt. Recently Finance Minister Jim Flaherty was said to be concerned about lenders loosening their mortgage standards and resulting in “emerging risk” to Canada’s economy. With this being said Canada Mortgage and Housing Corporation, CMHC, is reaching its limit for insured mortgages. The number says it all, CMHC’s number is sitting at $541 billion in insured mortgages and the agency’s limit is $600 billion. That leaving only $59 billion for future mortgages.
OSFI, the regulator in charge of all federally monitored financial institutions in Canada, has expressed concern that mortgagors may have borrowed more that they can afford once the rates move up from their all time low. At this point I want you to think long and hard as to who will be responsible ‘if’ homeowners default on their mortgages and CMHC is to payout?
All this being said, CMHC is still under its lending limit and most of this is just speculation. Personally, I just think it is better to know the worst odds and be informed and prepared for that outcome, than to live your life in a ‘bubble’ and think that money just falls from the sky.