30-Year Mortgages Created a Volume Problem Mortgage Insurers Can't Profit From

Sagen MI Canada reported Q2 revenues up 18% year-over-year while net income fell by $22 million. Both numbers reflect the same policy shift: Ottawa's expansion of 30-year amortizations to all first-time buyers and new-build purchases with less than 20% down.

The longer amortization period does exactly what it was designed to do. It lowers the monthly payment, which makes entry-level homes affordable on a cash-flow basis for buyers who would otherwise be locked out. A $650,000 mortgage at 5.2% costs $3,810 per month over 25 years. Stretch it to 30 and the payment drops to $3,555. That $255 matters to someone earning $85,000 who is trying to qualify under the stress test.

For Sagen, each of those new policies is a sale. Longer amortizations mean higher loan-to-value ratios stay higher for longer, which increases the premium base and extends the duration of coverage. The insurer collects more upfront and carries the risk over a wider window. In a stable market, that's profitable business.

The claims side moves in the opposite direction

Delinquency rates across insured portfolios have climbed measurably in 2026, driven primarily by the "renewal shock" cohort: borrowers who locked in sub-2% rates in 2021 and are now renewing into a 5% environment. Most of those loans were structured as five-year fixed terms. The lag built into that structure meant the payment increase didn't hit household budgets until this year.

Sagen's loss ratio, the percentage of premiums paid out in claims, rose from 21% in Q2 2025 to 34% in Q2 2026. The shift is explained by two variables: how many claims are filed and how much each one costs. Both have worsened.

Claim severity is the variable that matters more. A borrower on a 30-year amortization who defaults after three years of payments has built almost no equity. Monthly payments at that stage are 80% interest and 20% principal. If the home sells for what it was purchased at, or slightly below due to local market softness, the insurer covers the full shortfall between the outstanding balance and the recovered sale proceeds.

In a 25-year structure, the same three years of payments would have retired more principal, leaving a smaller gap for the insurer to fill. Stretch the loan and you stretch the vulnerability window.

Portfolio concentration adds a second layer

The 30-year policy applies to all first-time buyers but also to anyone purchasing a newly built home, regardless of prior ownership. That second category skews Sagen's book toward pre-construction and newly completed units, which have seen higher price volatility than the resale market in several regions. A condo tower completed in Vaughan in late 2025 is not moving at the per-square-foot price the buyer locked in two years earlier. When a sale triggers a claim, the insurer is covering the gap between a pre-construction valuation and a softer resale number.

The business is structured to handle claims. OSFI capital requirements ensure Sagen can absorb loss spikes without threatening solvency. The company remains comfortably above those thresholds.

What the structure cannot fix is the arithmetic: when every new policy carries higher duration risk and lower early equity accumulation, and when the portfolio tilts toward asset classes currently repricing downward, revenue growth and earnings growth decouple. Sagen is writing more business and making less money per dollar of premium collected.

The policy achieved its stated goal. More buyers qualified. The cost of that qualification shows up in the insurer's financials, not the borrower's monthly statement.