Canada's New Mortgage Rules: A Positive Development for Mortgage Insurers

Morningstar DBRS published a commentary discussing the positive implications for private mortgage insurers resulting from the Canadian mortgage reforms announced in September 2024.

Key highlights include the following:

-- Insured mortgage balances at chartered banks have declined over time, increasing the gap in relation to conventional mortgage balances, which have experienced steep growth.
-- The Government of Canada will allow 30-year amortizations on insured mortgages for first-time buyers, which will have a notable positive impact on insured mortgage market volumes.
-- Increasing the price cap to $1.5 million will further increase the demand for insured mortgages, especially in markets where average prices exceed the previous cap of $1 million.

"Based on the Government of Canada's recently announced proposals, we are revising our assessment to forecast moderate growth in insured mortgage volumes and outstanding amounts. This presents a positive development for the mortgage insurance sector, despite some incremental risk associated with higher-priced properties and longer amortizations," said Nadja Dreff, Senior Vice President, Sector Lead, Global Insurance & Pension Ratings. "We expect private mortgage insurers to continue showing robust profitability and capitalization levels that underpin their credit ratings while easily absorbing additional business volume."