Stricter CMHC Programs Also Affect Private Borrowers
Since 2010, Canada Mortgage and Housing Insurance (CMHC) changed the mortgage insurance program to reduce the potential of a housing market bubble in the sub prime market for insured mortgages. These changes include CMHC insured rental properties with a minimum 20% down payment. Traditional lenders such as banks require mortgage loan insurance for loans to purchase a home with less than 20% of the purchase price. Most federally regulated lending institutions cannot provide mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment (CMHC Website).
In 2012, the Office of the Superintendent of Financial Institutions introduced Guideline B-20, which required federally regulated banks to tighten their processes for approving mortgages and home equity lines of credit, particularly for self-employed income who can borrow only 65 per cent of the purchase value – 10 per cent less than what was allowed before B-20 – without default insurance from Canada Mortgage Housing Corp., Genworth Canada or Canada Guaranty (March 24, 2014 – Globe & Mail).
British Columbia (BC) with Metro Vancouver as the main urban center, has been identified as being the most entrepreneurial province in Canada. With 83.5 small businesses per 1,000 people, BC ranked first in the country in terms of small businesses per capita in 2012. The national average was 69.0 small businesses per 1,000 people. There were approximately 385,900 small businesses operating in BC in 2012, accounting for 98 per cent of all businesses in the province. About 82 per cent of these small businesses were micro-businesses with fewer than five employees. And self-employed workers without paid help represent 55% or 216,800 of all BC businesses (Small Business Profile – BC Stats 2013).
In addition to a high number of self-employed workers, Vancouver real estate is now the most expensive in the world. The average price for single-family detached houses in Metro Vancouver sold has soared to a record high of more than $1.36-million. March 4, 2014 – Globe & Mail.