{"id":33023,"date":"2026-05-05T18:01:07","date_gmt":"2026-05-05T18:01:07","guid":{"rendered":"https:\/\/www.europesays.com\/canada\/33023\/"},"modified":"2026-05-05T18:01:07","modified_gmt":"2026-05-05T18:01:07","slug":"are-canadian-taxpayers-on-the-hook-for-risky-mortgages","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/canada\/33023\/","title":{"rendered":"Are Canadian taxpayers on the hook for risky mortgages?"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

In Canada, mortgage default insurance can be obtained by either the borrower or the lender, and is mandatory for borrowers with down payments below 20 per cent.Graeme Roy\/The Canadian Press<\/p>\n

Canada\u2019s biggest banks have effectively turned mortgages into cash machines<\/a>, but the risks have not disappeared. They\u2019ve been redistributed. Default rates may be low<\/a> but riskier mortgages still exist, and when defaults occur, someone absorbs the losses. <\/p>\n

Canada\u2019s mortgage lenders can be broadly divided into four categories: banks, credit unions, mortgage finance companies (MFCs), and mortgage investment entities (MIEs). Most lenders in the first three categories primarily serve prime borrowers and generally carry mortgages with relatively low risk. <\/p>\n

MIEs, which include mortgage investment corporations (MICs)<\/a> and private lenders, focus on private mortgage lending<\/a> to subprime borrowers, exposing their investors to significantly higher risk.<\/p>\n

MIEs can generate stronger returns by charging elevated <\/a>rates on private mortgages<\/a>, and most continue to deliver on those returns. A few, however, have struggled in recent periods to maintain consistency or meet investor redemption requests.<\/p>\n

Analysis: How Canada\u2019s big banks turned mortgages into a nearly risk-free cash machine<\/a><\/p>\n

Risk is not confined to subprime lending either. Even prime mortgages carry some risk when down payments are small, and this is precisely where mortgage insurers step in. <\/p>\n

In Canada, mortgage default insurance<\/a> can be obtained by either the borrower or the lender, and is mandatory for borrowers with down payments below 20 per cent. When a mortgage exceeds 80 per cent of a home\u2019s value, a default may leave sale proceeds insufficient to cover the outstanding loan. Mortgage insurance transfers that risk from the lender to the insurer.<\/p>\n

Canada\u2019s three default insurers, government-owned CMHC<\/a>, and private firms Sagen<\/a> and Canada Guaranty<\/a>, absorb a substantial share of this risk. Despite being privately owned, both Sagen and Canada Guaranty carry a federal government guarantee, leaving taxpayers indirectly on the hook.<\/p>\n

That exposure has been deliberately reduced since 2016, when <\/a>federal policy changes<\/a> capped insurable home values at $1-million, limited amortizations to 25 years, and introduced a mandatory stress test, driving the steady decline in insured residential mortgage volumes shown above. <\/p>\n

Some thresholds have since been eased, with the price cap now at $1.5-million and 30-year amortizations<\/a> available to first-time buyers and new-build purchasers. But the broader trend of shrinking government-backed exposure remains intact.<\/p>\n

Analysis: Many Canadians don\u2019t shop around for their mortgage. Choosing what\u2019s familiar costs them<\/a><\/p>\n

Here is the most striking finding: insured mortgages are far safer than commonly assumed. In 2024, CMHC collected $2.3-billion in premiums and fees yet paid out just $45-million in claims<\/a> across its $440-billion portfolio \u2013 a loss rate of 0.01 per cent. <\/p>\n

Even focusing exclusively on the non-rental segment, by excluding CMHC\u2019s $213-billion multi-unit residential portfolio, claims amounted to just $38-million on a $227-billion portfolio, or a loss rate of 0.02 per cent. Both figures have fallen further in 2025, leaving Canada\u2019s insured mortgage market generating losses that are barely measurable.<\/p>\n

The data tells a consistent story: a decade of policy tightening has meaningfully reduced the government\u2019s footprint in Canada\u2019s mortgage market, leaving taxpayer exposure to mortgage losses at minimal levels. <\/p>\n

The recent slight loosening of insurance rules may slightly change that trajectory, but for now, the risk to taxpayers remains extremely low. <\/p>\n

Hanif Bayat, PhD, is the CEO and founder of WOWA.ca<\/a>, a Canadian personal finance platform. <\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: In Canada, mortgage default insurance can be obtained by either the borrower or…\n","protected":false},"author":2,"featured_media":33024,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[136,17,3125],"class_list":{"0":"post-33023","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-canada","8":"tag-appwebview","9":"tag-canada","10":"tag-chartoftheday"},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/33023","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/comments?post=33023"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/posts\/33023\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media\/33024"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/media?parent=33023"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/categories?post=33023"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/canada\/wp-json\/wp\/v2\/tags?post=33023"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}