The Canada Mortgage and Housing Corp. (CMHC) has indicated that they are bracing for the COVID-19 pandemic to further impact the Canadian housing market. The short term uncertainty is significant as housing demand falls with household incomes becoming weaker and weaker.
The sales and price records were broken in July 2020, but this was after the shut-downs in spring. So we can say the market played a little catch-up if we may say so. CHMC is noting however that the economic shock of the pandemic has not been fully reflected in the latest data on the housing market. They note that the process of the pandemic could still have a huge effect on new buildings as well as the prices and sales of existing buildings.
We expect it to take months for these impacts to materialize, but we can see some factors already coming to play. CMHC has noted a seeing the difference in provisions for insurance claims. This is showing up in the financial results proving that the impact is far-reaching.
CMHC’s net income for the three months prior to June 30, 2020, was $566 million. This is up from $379 million during the same period from the previous year. The arrears rate for which is 0.34%.
While they saw this income, they also saw an increase in claims expenses, jumping to a 711% increase up by $256 million. This was due to an increase in COVID-19 related claims including mortgage deferrals.
As part of a government program, CMHC this year purchased $5.8 billion insured mortgage pools. They also administered the small business Canada Emergency Commercial Rent assistance program.
In the next report from CMHC, we will see what impact the stricter underwriting criteria had overall. As of July, requirements for insured mortgages have become tighter and requirements for down payments have also become tighter. The corporation has even suspended dividends in an effort to save money in the event further action is needed by the government.
Stick around to read more as the information unfolds.