From 1995-2006 Canada had only two mortgage insurers. By next year the 6th will be on their way, U.S.-based MGIC.
MGIC Canada will offer “a unique alternative to business as usual” in the Canadian mortgage default insurance market, according to the company.
MGIC applied with the federal government this summer and is expected to launch sometime in 2008.
Mortgage default insurance is something that’s required of most borrowers with less than 20% down. That encompasses roughly 1/2 of all Canadian mortgagors. This stat has helped make Canada the 2nd largest, and one of the most profitable, mortgage insurance markets in the world.
As a result, insurers have been clamoring lately to hang up a shingle and grab their piece of the pie. The resulting benefits to borrowers are more choice in mortgages, lower insurance fees, and easier qualification standards (although some would term that a risk instead of a benefit).
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Side Bar: Reuters’ article (linked to above) states that Canada “doesn’t allow” teaser rates. Teaser rates are short-term rate discounts designed to lure in borrowers.
In fact, Canada does allow teaser rates. The difference, however, is that borrowers are qualified on the higher “reset” rate instead of the lower teaser rate.
Qualifying homeowners on the lower teaser rate is what caused much of the U.S. subprime trouble.
Last modified: April 25, 2014
