CMHC insures the banks - if you foreclose on your mortgage, the bank/lender has insurance. CMHC also provides special mortgage programs that allow the bank/lender to take risks with lending money.
CMHC says that the rationing is occurring, in part, because lenders have “unexpected(ly)” requested too much in guarantees this year. The insurer adds that the Minister of Finance set an $85-billion guarantee cap for 2013. Lenders have already blown through $66 billion of this limit and there are still five months to go until year-end {Rob McLister, Canadian Mortgage Trends}This is creating quite the buzz. A change like this is the first of its kind, but as mortgage associates, we're not surprised as CMHC has a tendency to issue changes in the mortgage industry overnight.
We know that consumers will be faced with mortgage interest rate hikes because of this (although we don't anticipate the hikes to be too great - some experts are saying a .20% increase is likely). The end result is that "Overall, mortgage rates will go from VERY cheap to cheap {Canadian Press}"
