Through the wonderful blue sky of 2.99-per-cent 5-year fixed money, however, is a storm of international and national constraints that may cause a slowdown in mortgage and housing markets.This made me wonder if the recent rush into low interest rate mortgage offers wasn't just a means for the banks to try and grab the last of the available CMHC insurance pool. Just pondering.
Friday, February 3, 2012
Rush to the Exits?
Is mortgage industry running out of money?
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4 comments:
My guess is the cap will be raised but nowhere near the amount to fulfill valid applications. The dregs will head to private insurers or scale back how much they can borrow.
Unfortunately, the Canadian taxpayer is still on the hook to back the private insurers. More so.
The taxpayer is on the hook for 90% of any private counterparty default (100% for CMHC) and any lender taking out private insurance must provision for this potential loss. CMHC is close to zero in terms of required loss provisions, which is why they command such a huge market share.
I don't know much about Australia's mortgage insurance business but with prices starting to show weakness I'm curious the make-up of its insurance under force and who might be on the hook if TSHTF.
I had no luck researching how prevalent mortgage insurance is in Australia. Also no luck figuring out who is re-insuring...
If I get some time, I'll look into it again.
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