CMHC will make it tougher to qualify for a mortgage

CMHC will make it tougher to qualify for a mortgage

Canada Mortgage and Housing Corp is going to make it tougher to get an insured mortgage, according to the Globe & Mail, which cites a unnamed source.

The CMHC is Canada's equivalent to Fannie of Freddie and for a premium allows Canadians to qualify for mortgages with less than 20% of a down payment. It's a crown corporation and carries an implicit backing from the government and is particular popular with first-time home buyers.

The CMHC made waves last month with a forecast that housing prices in the country will fall 9-18%.

The Globe reports:

The national mortgage insurance provider will ban potential homebuyers from borrowing funds to make a down payment, and raise the credit score required to get insurance from a minimum of 600 to 680. In addition, the housing agency is taking steps to ensure homeowners can afford their loan payments by lowering maximum debt service ratios, which measure a borrower's expenses relative to their income, the source said.

RateSpy tweeted a similar report earlier.

The CMHC is in a tough position where it doesn't want to pop the housing bubble, but also needs to protect itself from losses.

The loonie has shrugged off the news but the market will be watching price developments in Canadian housing very closely in the months ahead.

The announcement is said to be imminent.