The CMB Upsize and Open Door for Further Exciting Developments

  • Paul Uffelmann, Vice President, Capital Markets

Correction: First National’s Budget commentary emailed on November 5th, 2025 stated that a $20 billion increase to the CMB issuance limit in 2023 was shared with single-family. In fact, this increase was directed solely to multi-unit rental housing.

A big headline from the Tuesday’s Federal Budget was the $20bn increase in annual Canada Mortgage Bond (“CMB”) issuance. This is fantastic development that comes at a time when borrower demand has been strong for 5yr Canada Mortgage and Housing Corporation (“CMHC”)-sponsored securitization funding. CMBs are the primary source of funding for multi-unit rental housing in Canada so this change will support housing supply and affordability.

Some key details have yet to be released, foremost among them being how the additional issuance will be split between 5yr and 10yr issuance (or other terms). Ideally this split will be fairly dynamic with some ability to adjust to changing market conditions and borrower preferences. Given the current state of the market, the most impactful move would be to maximize 5yr issuance for the next few quarters. We expect CMHC will provide clarity on this in coming weeks.

We likely have not seen the full market impact of the change in CMB spreads (over Government of Canada Bonds). The market’s initial reaction was a ~1bp widening. Increasing from $60bn to $80bn of annual issuance, coupled  with the Government’s purchases remaining at $30bn annually rather than maintaining the 50% ratio of the past two years (if you’d like to understand their rationale, a paper published by the Office of the Parliamentary Budget Officer on October 30th lays it out), is a material but manageable change for the market. We could see more spread movement as we get clarity on the anticipated new 5yr vs. 10yr issuance volume.

Another item in the Budget that hasn’t been getting as much attention, but that could be even more consequential, is the following: “In Budget 2025, the government proposes to amend the National Housing Act to increase CMHC's guarantees in force limit to $1 trillion and to decouple this limit from the corporation's insurance in force limit.” (if you missed it, it can be found in Annex 5 - Legislative Measures). This provides the Government and CMHC the flexibility to make changes that will broadly affect funding for all insured mortgages in Canada.

Bear with me while I go a little bit into the weeds on this. The $1 trillion limit governs, among other things, the maximum amount of National Housing Act Mortgage-Backed Securities (“NHA MBS”) that can be outstanding at any point in time. NHA MBS is an important funding source for both insured single-family and multi-unit rental*. The Government and CMHC manages this by setting a limit to the amount of new NHA MBS that can be issued each year, $170bn in 2025.

The last time CMB issuance increased, there was a dollar-for-dollar increase in the NHA MBS annual limit so many market participants expect a minimum increase of $20bn of NHA MBS. However, the increase in the guarantees in force provides the Government and CMHC the room to increase by more than this. Anything beyond a $20bn increase would largely benefit insured single-family borrowers, including first-time home buyers.

This limit change also opens the possibility for CMHC to revisit an even more obscure limit: the $9bn annual guarantee threshold. This is the amount of NHA MBS that an individual issuer or lender can issue beyond which a penalty fee is levied. This penalty has historically acted to moderate the growth of smaller mortgage lenders while having little impact on the ability of the largest banks to fully utilize the NHA MBS program. With the Budget and recent Bank of Canada speeches both highlighting the need for more choice and competition in financial services, some market participants are hopeful that the $9bn penalty threshold will be increased or abolished altogether.

Here is the bottom line (in case anyone has made it this far), the $20bn CMB increase is great news and giving CMHC the opportunity to make further changes could be just as impactful!

Your First National representative is ready to discuss these changes and help as you think through your next steps. Have a great weekend!

 

* I know I said earlier that the CMB is the primary source of funding for multi-unit rental and this appears to be a bit contradictory, but NHA MBS underlies the CMB so both statements are actually true.

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