Mortgages designed for Life
Mortgage Calculator

Mortgage Calculator

You can enter a loan amount and find out what your estimated monthly payments would be...

House Price
Down Payment
Interest Rate
Term Length
your payment is:

or enter the amount you want to pay per month and find out what size of mortgage you can afford.

Monthly Budget
Interest Rate
Term Length
mortgage amount:

Canada’s housing agency shrugs off ‘bubble’ talk, defends role in debt financing

National Post/Brent Foster

Canada Mortgage and Housing Corp. has been in the crosshairs of the federal government for a while now. Late last month, Ottawa pulled the trigger, announcing the agency would come under tougher scrutiny.

OTTAWA — It’s not often a Crown corporation bangs its drum loudly, appears to question market sentiment and misrepresents the central bank’s monetary policy — all in the same day.

Canada’s housing agency did just that on Tuesday, issuing an annual report that read like a defence of its business practices, and saying that despite concerns by Jim Flaherty, the Finance Minister, and many others about the real possibility of an overheated housing sector, there was no sign of a market bubble.

In the same report, referring to interest rates, it offered that the Bank of Canada “has indicated that it is likely to remain at 1.0% for 2012,” prompting a strong denial by the central bank itself. CMHC later issued a clarification, saying it was characterizing views of market forecasters and “we don’t have specific guidance from the Bank of Canada. We’re not in the inner circle of monetary policy.”


“I’ve been concerned about the CMHC for some time," Jim Flaherty said late last month when announcing the agency would come under tougher scrutiny.

The 66-year-old Canadian institution has been in the crosshairs of the federal government for a while now. Late last month, Ottawa pulled the trigger, announcing the agency would come under tougher scrutiny. The responsibility for ensuring that happens will be passed on from the Human Resources and Skills Department to the Office of the Superintendent of Financial Institutions.

“I’ve been concerned about the CMHC for some time in the sense that it’s become an important financial institution in Canada, and it was not subject to the same supervision by the Office of the Superintendent of Financial Institutions,” Mr. Flaherty said in announcing the change.

Recently, the minister has even contemplated eventually taking the mortgage insurance function of the CMHC private, telling a National Post editorial board such a role for the agency was not “essential.” According to a Bloomberg News report, former CMHC Chairman Dino Chiesa, who’s term ended in March, studied the sale of Australia’s government-owned insurer and presented the findings to the Bank of Canada.

Rock-bottom mortgage rates have fueled Canada’s housing boom, but they have also raised concerns over record-high household debt as many consumers take advantage of cheap lending costs while they last. Higher rates could push many households beyond their limit and out of the market, and that could lead to a drop in prices, especially in the over-development condo sector.

On Tuesday, CMHC also reported housing starts jumped 14% in April, mainly for multi-unit construction, with some economists saying this was proof the housing market is heating up, especially in the condo segment in major cities.In its annual report, however, CMHC said, there was no “clear evidence” of a housing bubble.While the report did not make specific reference to the government’s changes in the oversight of CMHC, it did offer what could be characterized an strong validation of its role and operations. “CMHC follows prudential regulations as set out by the Office of the Superintendent of Financial Institutions, with CMHC maintaining more than twice the minimum capital required by OSFI,” it said. “As a result, CMHC is well positioned to weather possible severe economic scenarios.”

The report also highlighted the important role CMHC plays in the housing market, which it said accounted for 20%, or $346-billion, of Canada’s gross domestic product last year. It pointed out the agency “manages its mortgage loan insurance and securitization guarantee operations using sound business practices that ensure commercial viability without having to rely on the government of Canada for support.”

Its mortgage loan insurance portfolio in 2011 accounted for most of its $1.53-billion in net income, it said, “which helped improve the government of Canada’s fiscal position.”

“CMHC manages its insurance business in a financially prudent manner and generates reasonable returns for the Government of Canada,” it said. “Since 2002, CMHC has contributed $16-billion to improving the government’s fiscal position.”

The corporation, created in 1946, currently has a $600-billion loan limit, which the government increased three years ago from $450-billion. The federal government guarantees the full value of mortgages insured by CMHC and 90% of loans insured by private firms.

Posted in: FP Street  Tags: cmhc, housing market, Jim Flaherty


Back to News


2014 [34] 2013 [62] 2012 [83]
December [6] November [5] October [4] September [5] August [9] July [5] June [6] May [9] April [9] March [6] February [12] January [7]
2011 [148] 2010 [88]