The Canada Mortgage and Housing Corporation announced last week that as of July 1 they would be tightening the lending criteria for anyone wishing to purchase a property. The government-backed agency made the move amid growing concern that housing price continue to increase rapidly despite many Canadians being out of work due to the Covid 19 crisis.
As of July 1st, the CMHC plans to increase the minimum credit score required from the current 600 to 680. It will also strictly enforce the 35% of annual income limit of gross debt servicing ratio as well as the total debt servicing ratio of 42%. Right now those ratios can go as high as 39% and 44% respectively.
The biggest surprise about the announcement last week was that the minimum downpayment required for homebuyers has remained at 5% of total home cost as many analysts believed that it would be increased to 10%.
They are also disallowing any non-traditional sources of down payment that, in their words, “increase indebtedness”.
The housing market has continued to see price growth despite the levelling off of buying/selling activity, driven mainly by a lack of inventory making available homes worth more than ever. However, the CMHC does not believe that this growth is sustainable and is introducing these new measures to dampen price increases despite the on-going Covid pandemic.
Sources:
https://www.cbc.ca/news/business/cmhc-rules-1.5599987
https://www.canadianmortgagetrends.com/2020/06/reaction-cmhcs-new-restrictions-insured-mortgages/
