17 Apr

Could CMHC change its ‘one-size fits all’ mortgage insurance to reflect real risk?

General

Posted by: Eileen Crosbie

Buy a house with less than a 20% down payment and you have to get mortgage default insurance. There’s no choice. The rules are dictated by Ottawa and protect the banks, in the event you default.

 

The rate you’ll be charged bears very little relation to your individual risk. You have a fantastic job, a great credit history and live in a part of the country where the housing market is on solid footing? Forget it, you’re paying the same premium as anyone else and it’s mostly based on your down payment.

 

“The mortgage insurance product, irrespective of who sells it, is the same product. There is less product differentiation that there is among choices of 89 octane unleaded gasoline,” says Finn Poschmann, Vice President of Research for the CD Howe Institute. “In gasoline, at least you can choose among ethanol content levels and detergents. Not so with mortgage insurance.”

 

Starting May 1st consumers will pay even more for this insurance, which provides a backstop to the entire Canadian economy given Ottawa is on the hook for close to the $1 trillion in mortgages it guarantees.

 

Click here to see the full Financial Post article.

17 Apr

Bank of Canada monetary policy decision: The 4 key takeaways

General

Posted by: Eileen Crosbie

The Bank of Canada held its benchmark rate steady today, and kept its ‘neutral’ stance on future moves in an as-expected policy statement that had the market, if not economists, stifling yawns.
 
“When in doubt, do nothing, and for the most part, that’s what the Bank of Canada opted to do in today’s monetary policy statement,” said CIBC Economist Avery Shenfeld.
 
Overall, the message was little changed, though the bank cut its growth forecast on the year from 2.5% to 2.3% on the impact of the harsh winter. It also pushed up its call for inflation this year, while at the same time warning about the risks of low inflation.
 
“Somehow, the Bank managed to find a way to sound even more concerned about ‘lowflation’ even as they upgraded the forecast for headline inflation,” said BMO Chief Economist Douglas Porter.
 
Click here for four key takeaways from today’s Bank of Canada monetary policy decision courtesy of the Financial Post.