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Bricks & Sticks

by Desi Auciello

Desi Auciello is the 2006 GTHBA President, and is also president of Cachet Estate Homes.

CMHC enhances housing affordability

Date: July 7, 2006

Last week, I mentioned that there have been some developments on the mortgage insurance front which should have positive impacts on home buyers.

The Canadian Home Builders' Association notes that half of all Canadians are now using high-ratio mortgages, prompting the federal government to allow more competition. 

Currently, there are only two players in the mortgage insurance market -- Canada Mortgage and Housing Corporation and Genworth Financial Canada-- however Ottawa has received at least two applications by U.S. mortgage insurers to enter the Canadian market.

The federal government has also increased the guarantee for insurers from $100 billion to $200 billion. 

In a related move, the government announced it is proposing to lower the mortgage down payment consumers are required to make to 20 per cent from 25 per cent before the law requires the purchase of mortgage insurance. 

Legislation based on the proposals will be introduced this fall and will be studied by a parliamentary committee before passage, expected next winter, pending an election.

Lower payments

Amid all of this change, CMHC recently announced even more dramatic enhancements to its mortgage insurance products. In particular, CMHC is eliminating application fees, offering insurance for mortgages with longer amortizations and insuring interest-only mortgages.

Applications fees for mortgage insurance typically range from $165 to $235, over and above the insurance premium.  Effective June 28th, CMHC has eliminated application fees on all high-ratio mortgages.

CMHC is also moving to facilitate homeownership by introducing extended amortization periods of up to 35 years, which will reduced the monthly carrying cost of homeownership. For example, on a $200,000 home with a five per cent down payment, the monthly payment drops from $1,215 at the standard 25 year amortization, to $1,075 with the 35 year amortization.

In addition, CMHC will provide mortgage insurance that allows lenders to offer borrowers with a proven history of managing their credit responsibly, the option of making interest-only mortgage payments for up to the first 10 years when they purchase or refinance their home.

"These innovative financial solutions will allow more Canadians to buy homes, and to do so sooner," said Karen Kinsley, president of CMHC. "By reducing costs and increasing flexibility, CMHC continues to help Canadians realize their dreams of homeownership."

CMHC has been Canada's national housing agency for over 60 years. CMHC is committed to helping Canadians access a wide choice of quality, affordable homes, while making vibrant, healthy communities and cities a reality across the country.

Fun stats

Recent statistics on new home size and amenities out of the U.S. National Association of  Home Builders reveal some fascinating trends, most of which have been mirrored if not in whole, substantially in part, here in Canada.
The NAHB reports that:

  • the average floor area in a newly built home in 2005 reached an all-time high of 2,434 square feet, up from just 1,645 square feet in 1975;
  • more than half of all newly built single family homes in 2004 - 58 per cent -- had nine foot or higher ceilings on the first floor, up from an estimated 15 per cent of homes 30 years ago;
  • the percentage of homes built with garages for three cars or more has doubled from 10 per cent in 1991 to 20 per cent in 2005;
  • what has shrunk over the years is lot size, which U.S. census data shows has dropped from a median of about 10,000 square feet in 1990 to 8,500 sq. feet today. This is one area where Canada has not mirrored the U.S. - our average lot sizes would be much smaller;
  • between 1975 and 2005, the percentage of homes built with air conditioning went from 46 per cent to 89 per cent;
  • as of 2005, just over one quarter of newly built homes were built with three or more bathrooms, up from an estimated 5 per cent in 1975;
  • the portion of homes built with 1.5 bathrooms or less has declined from 41 per cent to just over 4 per cent over the past 30 years;
  • statistics collected as far back as 1992 indicate a growing trend toward including porches and/or patios in new home designs and a decline in the share of homes built with decks.
  • And to conclude with the story on storeys, the proportion of one-storey homes has declined from 65 per cent in 1975 to 44 per cent in 2005 (we would be much lower in Canada), while the number of two-storey homes has increased from 23 to 55 per cent.