Fixed mortgage rates are primed for a .25% to .50% increase over the next couple of months. The Department of Finance’s policy change restricting the amount of MBS mortgages that Canada Mortgage and Housing Corp (CMHC) will insure is to blame.
Without the ability to insure and then securitize as many mortgage assets, Canada’s mortgage lenders will have to resort to more expensive sources of capital to fund Canadian mortgages. CMHC has already advised our mortgage lenders that effective immediately they each face a $350 million monthly cap. A more intricate allocation model is expected to be released this Fall perhaps allowing larger institutions to access more insurance.