Canada Mortgage and Housing Corp. is putting a cap on the amount of mortgage-backed securities sold by banks that it is willing to guarantee.
A spokesperson with CMHC confirmed media reports Monday that the national housing agency will, effective immediately, limit banks and other mortgage lenders to $350 million worth of new mortgage-backed securities per month. The decision comes in the wake of “unexpected demand” for the guarantees, a spokeswoman for CMHC said in an emailed statement.
The move takes some of the air out of the housing market by forcing banks and other lenders to be responsible for the risk of mortgage defaults, instead of being able to pass that risk on to government and taxpayers via the CMHC.
It’s the latest move from a government that’s getting increasingly vigilant about its attempts to cool down the housing market. After loosening rules to allow for no-money-down mortgages of more than 40 years a half-decade ago, the federal government has taken multiple steps to ratchet those rules tighter again, limiting new mortgages to no longer than 25 years, and requiring a minimum down payment of five per cent of the value of the home.
Those moves were targeted directly at the homebuying public. But moves such as the one revealed Monday target the banks themselves, by effectively limiting the amount of money they have at their disposal to lend out in mortgages.