CMHC announced that it will pull back on its growth of insured mortgage funding over the next 5 years.  With total mortgages insured by CMHC close to 557 billion by the end of the year the government has put pressure on CMHC to start to slow down on amount of mortgages they insure.

An insured mortgage (borrowers with less than 20% down) guarantees the lender loan payback in case of default by the borrower.  Under the Bank Act financial institution can only loan up to 80% of the purchase price of a property.  By having the mortgage insured borrowers can borrow up to 95%.

Consensus is that borrowers qualifying on regular income  and credit will not be effected too much by the changes.  However self employed clients and insured rental properties could be effected more as their loans are considered high risk.

The good news is that CMHC is not the only mortgage insurer in Canada.  Genworth which is a private company is the second largest mortgage insurer in Canada and currently has no plans to cut back on its funding growth.  However with the largest provider of mortgage insurance looking to slow down the amount of mortgages it insures this will definitely have an impact on the Canadian mortgage market and real market as a whole.