Ottawa to introduce ‘risk fee’ on CMHC insurance
Canada will impose a “risk fee” starting Jan. 1 on mortgage insurance provided by the country’s housing agency to compensate taxpayers for potential losses in the housing market.
Finance Minister Jim Flaherty's latest attempt to cool the housing market will be introduced January 1st, 2014, in the form of a risk fee on mortgage insurance provided by the Canada Mortgage and Housing Corporation (CMHC). The change is not expected to have an impact on the cost of mortgage funding, according to CMHC's chief financial officer, Brian Nash. "We don't see it as a material event," said Nash.
The fee, 3.25% to the government for CMHC insurance, is being introduced as a form of risk management for insured mortgages. It is believed this new move may have a very slight impact on mortgage rates. Peter Routledge, Financial Analyst for the Financial Post said "What the government's trying to do is really lean into the interest rate wind and, in a very targeted way, keep the cost of borrowing for households steady."