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Canada’s national housing agency will no longer offer mortgage insurance for condominium construction – a further step by the agency to cool the housing market.

“The changes are a business decision designed to increase market discipline in residential lending while reducing taxpayers’ exposure to the housing sector through CMHC,” the agency said in a statement. “They also support the government’s continued efforts to adjust the housing finance framework to restrain growth of taxpayer-backed mortgage insurance.”
 
Canadian house prices have risen steeply since the 2008 financial crisis. CMHC faces the difficult task of repaying lenders in case borrowers default.  CMHC has taken several steps to cut the amount of insurance in force. Earlier this year, it stopped offering mortgage insurance to second home buyers, and also to self-employed borrowers who fail to submit third-party income validation. 
 
The number of units CMHC insures annually has fallen by 67% from its peak in 2009. Two other private agencies underwriting mortgage insurance are Genworth Canada and Canada Guaranty, but both still smaller than CMHC, which has a 60% market share, down from 80% a few years ago.
 
The Canadian government has taken several measures in the past five years to cut mortgage exposures. 
  • The maximum amortization period was reduced to 25 years, from 40 years. 
  • Government-backed mortgage insurance is available only for homes with a purchase price of less than $1 million. 
  • It is mandatory for home buyers to make a minimum down payment of 5%.  
  • If the property will not be owner-occupied, the minimum down payment is 20%.

This article was republished with permission from Global Property Guide.