This week, the Canada Mortgage and Housing Corporation announced changes to its underwriting criteria (https://bit.ly/2A8qPxY).  Evan Siddal’s, CMHC’s President and CEO, remarks suggest  a more pessimistic view of the housing market and the economy than perhaps the Bank of Canada or other economists are signalling.  As a result, the CMHC has revised its underwriting criteria in a manner that makes qualifying for a loan more difficult.

So what does this mean to the average borrower?  The majority of first mortgages are insured by either CMHC, Genworth Canada or Canada Guaranty, the later two have yet to follow suit so for now there are options for the lenders.  It is generally the lenders who choose the insurer when a loan is insured.

If your lender’s only option is CMHC as the insurer of your loan, then the impact is that a debt free borrower will see minimum income for a $300k loan rise to approximately $79,000, an increase of about $8,000.  A borrower with a car payment and some credit card debt will require income of about $96,000 to qualify for the  $300k loan.

For some, it will be the income increases that will put a CMHC insured loan out of reach, for others the increase of minimum credit score to 680 from 600 could put a loan out of reach.  Will this further cool the Canadian housing market?  Without a doubt.  By how much remains to be seen.