CMHC has notified banks, credit unions and other mortgage lenders that they will each be restricted to a maximum of $350-million of new guarantees this month under its National Housing Act Mortgage-Backed Securities (NHA MBS) program
CMHC’s move may increase mortgage rates charged by Canada’s largest banks by between 15 and 45 basis points, National Bank Financial Inc. analyst Peter Routledge said in an Aug. 5 research note. A basis point is 0.01 percentage point. Smaller competitors that don’t see their funding costs increase to the same degree may benefit, he said.
“Given the differentials in funding costs via NHA MBS or unsecured long-term funding, I could see [an additional] 20 to 65 basis points in the cost of funding mortgages for the larger banks,” he said. “All else equal, we could see mortgage rates start to move up in unison.”
“Given the differentials in funding costs via NHA MBS or unsecured long-term funding, I could see [an additional] 20 to 65 basis points in the cost of funding mortgages for the larger banks,” he said. “All else equal, we could see mortgage rates start to move up in unison.”