Fiscal Analysis of Proposed Premium Reduction for Mortgage Insurance

Abstract

This note provides fiscal analysis of the Government’s proposal to reduce mortgage insurance premiums collected by the Canada Mortgage and Housing Corporation (CMHC).

Highlights

  • The Liberal Party of Canada’s 2021 electoral platform proposed a 25% decrease in the mortgage insurance premiums charged by the Canada Mortgage and Housing Corporation (CMHC) while also increasing maximum insurable sale price to $1.25 million, which is to subsequently be indexed to inflation.

  • PBO analysis finds that the cost of this measure will be $1.4 billion over five fiscal years.

  • PBO estimates that this measure would provide the average home buyer a one-time savings of $5,341 in 2022-2023, increasing to $5,863 in 2026-2027.

  • Having considered alternative scenarios PBO does not anticipate that CMHC will be able to increase the number of homes it insures or its market share to the point where the policy would be revenue neutral.

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