How Does CMHC’s Funding Cap Restrictions Affect You?

By August 7, 2013Mortgage News

First of all, I’ll explain what is taking place here. CMHC is restricting each and every mortgage lender (banks, credit unions, etc.) to a maximum $350 million of new guarantees this month under it’s National Housing Act Mortgage-Backed Securities program.This sounds like a lot but keep in mind the year to date total of mortgage-backed securities to end of July is already at $66 Billion! This new restriction affects the lenders’ bottom-line which ultimately means any shortfall (or reduced profitability) by lenders will no doubt be charged to the consumer with higher mortgage rates in the very near future. Analysts are predicting an increase ranging anywhere from 20 to 65 basis points. This increase will apply only to the fixed rate products and not anything to do with the Prime lending rate which remains at 3.00%.

How may this affect you? Besides paying more interest on your mortgage (due to higher rates), qualifying for a new mortgage will be tougher. As interest rates rise, the maximum amount you can borrow will be reduced accordingly. This directly impacts the price you can afford to pay for a residence or the amount you can borrow if you are refinancing.

So, if your locked-in mortgage is up for renewal within the next 12 months you may wish to consider renewing your mortgage earlier at today’s low rates. If you are considering the possibility of refinancing your mortgage to consolidate debts or renovate your home, this may very well be an excellent time to do so. Our best “feature” product is a 5 year variable rate at Prime minus 0.45%. Economists are predicting the Prime lending rate not to change for at least another year or longer, so why not take advantage of a variable rate mortgage at 2.55%? If you are wanting peace of mind with a fixed rate product, our best 5 year fixed rate is currently at 3.39%.