Private Mortgage Insurance Premiums Could Rise Under OFSI Proposals
A major mortgage lender and Canada’s largest private mortgage insurer say that homebuyers are set for increased costs if proposals by the Office of the Superintendent of Financial Institutions to strengthen capital requirements are introduced.
Mortgage insurer Genworth says that “overall, the company supports OSFI’s efforts to develop a more risk sensitive capital model to ensure safety and soundness in the Canadian mortgage and housing system.”
But in a report, the insurer estimates that changes to the way capital requirements are calculated could mean a rise in premium rates especially in Calgary, Edmonton, Toronto, Vancouver and Victoria, which would be affected by new supplementary requirements.
National bank Financial has also warned that premiums are set to rise if the rule changes are adopted.
In a client note Monday, the lender’s chief economist Peter Routledge wrote: “We believe Canadian homebuyers will absorb the bulk of these higher costs directly or indirectly via higher mortgage interest rates.”
He further notes that first-time buyers and mortgage broker channels that rely on this market are most likely to be impacted by the new rules.
“Mortgage insurance premium increases passed on to the homebuyer through higher mortgage interest rates will reduce affordability, potentially stunting sales activity and slowing house price appreciation,” Routledge warned.
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