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A 1940s-era post-war victory bungalow on Topham Road in Toronto, Ontario, Canada.
A 1940s-era post-war victory bungalow on Topham Road in Toronto, Ontario, Canada.
(Deborah Baic/The Globe and Mail)

Why Ottawa is raising mortgage insurance premiums

Why are mortgage insurance premiums about to rise in Canada for the first time since the 1990s? The new guidelines that the country’s financial watchdog issued Monday offer some insight.

Banks are required to obtain insurance when they sell a mortgage to a customer who has a down-payment of less than 20 per cent. The mortgage insurance pays the bank back if the customer defaults on the loan. The insurance is there to protect the banks, but the banks almost always pass the cost of the insurance on to the customer.