News & Resources

CMHC’s Market Share Waterfall

May 6, 2021
4 mins
Business buildings lining Bay Street in downtown Toronto

The nation’s former leader in residential mortgage default insurance is now a distant second. Who cares? Two types of people:

a) People with strong income potential and student debt

  • Think professionals out of school or skilled trades with less than 20% down payments.
  • These are folks who can still buy in expensive big cities thanks to private insurers like Sagen and Canada Guaranty, which allow them more buying power than CMHC (due to CMHC’s rule tightening last July).
  • Sources tell us that about 45% of the applications Sagen now gets are deals that don’t meet CMHC’s revised guidelines. Sagen can be selective with these deals because it sees so many of them.

b) People who care about taxpayer risk

  • Canadians now have a private default insurer putting more of its own capital before taxpayer capital in the highly unlikely event it fails. And in that one-in-a-1,000 case of insolvency (or whatever it is), taxpayers cover only 90% of the private insurer’s loss, not 100%, in the case of CMHC.
  • Private insurers also have a larger percentage of properties in major cities with liquid housing markets. If borrowers default en masse, that could reduce risk of loss compared to CMHC. The reason: CMHC has been forced to insure more suburban or rural properties after it reduced borrower buying power.

Today's Featured RatesUpdated 09:27 ET on Sep 27, 2023

Rates are based on a $300,000 mortgage.

card image
3.60%
Term
3 Yr Variable
Loan to value
80.01% to 95%
Insurance
Insured
Rate held until
Dec 30
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1.99%
Term
5 Yr Variable
Loan to value
80.01% to 95%
Insurance
Insured
Rate held until
Jan 29
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1.67%
Term
5 Yr Fixed
Loan to value
80.01% to 95%
Insurance
Insured
Rate held until
Nov 15

Many wonder whether the government will step in and force privates to match CMHC’s restrictive policies. We’ll bet that won’t happen for two reasons: (A) it would be short-sighted because of the portfolio risk mentioned above, and (B) it would strand deserving borrowers, leaving them no reasonable financing options given their favourable risk profiles.

The next year is going to be interesting because CMHC has a new CEO who may be unhappy that its market share chart looks like Niagara Falls. We expect the housing agency to fight and scrap for share through year-end.

That said, CMHC seems more focused on its social housing mandate than market share. So, it probably won’t overtake Sagen for a long, long time — unless it rolls out new products or backtracks on last year’s rule tightening.

That may not be out of the question after the housing balloon deflates. After all, there’s little actuarial justification for CMHC’s restrictive lending practices, according to critics, its competitors, CMHC’s own government-monitored stress tests, arrears data and so on.

Rob McLister

Rob McLister has been informing mortgage consumers and professionals since 2007. In that time, he’s written more than 2,500 mortgage stories for publications ranging from the Globe and Mail — where he presently serves as mortgage columnist — to the National Post, Maclean’s, Canadian Mortgage Trends and RateSpy.com. Regularly quoted throughout the media, Rob is a committed advocate of greater transparency in the mortgage industry. He’s also been a vocal consumer advocate for more sensible mortgage regulation. In 2011, he launched two mortgage fintechs: mortgage comparison website RateSpy.com and digital mortgage broker intelliMortgage Inc. The former is the go-to source of Canadian mortgage news and the only site comparing all publicly advertised prime mortgage rates. The latter is Canada's leading online mortgage provider for self-directed borrowers. Both companies were acquired in 2019 by RATESDOTCA Group Ltd.

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