CMHC reaching its lending limit - May tighten lending conditions

As reported in Canadian Business, a federal limit on the amount of loans Canada Mortgage and Housing Corp. is allowed to insure could lead to stricter lending conditions and a cooling of the housing market, TD Bank economist Sonya Gulati said Tuesday.

"It may serve to tighten the housing market," Gulati said.

CMHC had insured $541 billion in loans at Sept. 30, compared with $501 billion a year earlier and $514 billion as of Dec. 31, 2010. The limit was raised to $600 billion in total outstanding insured amounts from $450 billion in 2008.

Although Ottawa could increase the limit, as it did in 2008 in the wake of the financial crisis, it may not want to if it thinks too many people are borrowing more than they should, Gulati said.

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