🏦 Insured vs. Uninsured Mortgages: A Decade of Rising Risk

Since 2016, the share of uninsurable mortgages in Canada has increased significantly, making bank mortgage portfolios riskier than before.

In Canada, mortgages can be insured either by the borrower (through mortgage default insurance) or by the lender (through portfolio insurance). Here, we’re looking at both types together.

💡 Why is this happening?

1️⃣ Regulatory changes (2016):

Since 2016, portfolio insurance by lenders has had to meet the same strict criteria as transaction-level (borrower) default insurance. This drastically reduced lenders’ ability to insure their mortgage portfolios.

2️⃣ Rising home prices:

As detached home values—especially in markets like Toronto and Vancouver—surpassed $1 million, more mortgages became ineligible for insurance under older CMHC rules; however, the rule was modified recently.

3️⃣ More refinances:

Mortgage refinances are uninsurable, and the growing number of homeowners refinancing existing properties adds to the rise in uninsurable loans.

📊 The result:

A growing portion of Canada’s mortgage market now sits outside the government-backed insurance framework, shifting more credit risk to lenders and the broader financial system.

That said, overall risk remains contained, supported by Canada’s recourse and foreclosure rules, which provide strong protection for lenders.