I'll start again.
Early in the crisis, in co-ordinated action with the Bank of Canada and the Department of Finance, we relaunched the insured mortgage purchase program. This tool helps ensure that banks have access to reliable term funding so they can continue their lending activities and housing markets remain functional.
Under the current revised program, we stand ready to purchase up to $150 billion of insured mortgages. We are also prepared to expand the issuance of conventional securitization programs, as needed.
In addition, we acted quickly to help Canadians who are having difficulty paying their mortgages or rent due to income loss because of COVID-19. In co-ordination with private mortgage insurers, we are offering temporary deferral of mortgage payments for up to six months. We estimate that 12% of mortgage holders have elected to defer payments so far, and that figure could reach nearly 20% by September.
The same mortgage deferral relief is available to our multi-unit clients in order to facilitate rent relief for their lower-income tenants. And we have taken steps to ensure that non-profit and co-operative housing providers continue to receive federal rent subsidies for low-income tenants, even if their current agreements with us have expired. In both cases, we have insisted that recipients of federal support refrain from evictions during the crisis.
More recently, the Prime Minister announced that CMHC will administer the Canada emergency commercial rent assistance for small businesses. The program will lower rent by 75% for small businesses affected by COVID-19. While the program is not housing related, we are pleased to use our real estate expertise to help struggling entrepreneurs.
However, as the committee is no doubt aware, almost everything we have done in response to the crisis involves borrowing. Just as governments are taking on more debt to finance the COVID-19 response, mortgage deferrals are adding to already historic levels of household indebtedness, and I have provided you with some slides on that. Canadians are amongst world leaders in household debt, as the committee knows. Pre-COVID, the ratio of gross debt to GDP for Canada was about 99% due in part to increased borrowing but even more so to projected declines in GDP. We estimate it will increase to about 115% in the second quarter of this year and reach 130% in the third quarter before declining. These ratios, I note, are well in excess of the 80% threshold above which the Bank for International Settlements has demonstrated that national debt intensifies the drag on GDP growth. Looking at debt multiples of disposable income—a number people are more familiar with—we see that this measure will climb from 176% in late 2019 to well over 200% through 2021. Moreover, CMHC is now forecasting a decline in average house prices in Canada of 9% to 18% in the coming 12 months.
The resulting combination of higher mortgage debt, declining house prices and increased unemployment is cause for concern for Canada's longer-term financial stability. Another slide I gave you quotes Hyman Minsky, who said that debt causes fragility.
A team, therefore, is at work within CMHC to help manage a growing “debt deferral cliff,” as we call it, that looms this fall when some unemployed people will have to start paying their mortgages again—that's assuming some economic recovery. As many as one-fifth of all mortgages could be in arrears if our economy has not recovered sufficiently.
We feel that we need to avoid exposing young people, and through CMHC, Canadian taxpayers, to the amplified losses that result from falling house prices. Unless we act, a first-time homebuyer purchasing a $300,000 home with a 5% down payment stands to lose over $45,000 on their $15,000 investment if prices fall just 10%, which we are forecasting. In comparison, a 10% down payment offers more of a cushion against possible losses.
If there is an insurance claim, and there will be more, CMHC will be called upon to cover these losses. We're therefore evaluating whether we should change our underwriting policies in light of developing market conditions.
Our support for home ownership cannot be unlimited. It's like blood pressure: you can have too much, but you need some. We've found that housing demand is far easier to stimulate than supply, and the result, as we've seen, is Economics 101: ever-increasing prices. If housing affordability is our aim, as surely it must be, then there has to be a limit to the demand we help to create, especially when supply isn't keeping up.
People believe owning a home is essential for retirement savings. Indeed, as shown in the study on which I've given you a chart, most of the increase in the shared wealth over the last 20 years in western countries has been in housing. The average Canadian homeowner in the last 20 years has had a tax-free gain, on average, of $340,000 in the value of their home. That sounds great until you add in the fact that $300,000 of that gain has been created by increased borrowing. These house prices and debt levels are increasingly out of reach for young people. In fact, home ownership tends to be lower in countries with higher incomes.
In addition to restraining our underwriting practices to limit excessive borrowing, we at CMHC must also take decisive, urgent action to accelerate the supply of rental housing. We have taken steps to do so in funding under the national housing strategy, which is very much focused on creating more affordable rental housing for Canadians. The federal government is contributing billions of dollars to housing, along with provinces and territories. Municipalities can continue to help by accelerating their approvals, contributing land and/or waiving fees and taxes to support the development of affordable housing, as well as revising their property tax regimes through a lens of impacts on housing affordability.
I'll wrap up by saying that, at CMHC, along with our 2,000 colleagues, Romy and I remain fully committed to our aspiration that by 2030 everyone in Canada will have a home that they can afford and that meets their needs. If anything, COVID-19 has brought the value of stable shelter into sharp relief, strengthening our resolve.
Thank you. I'd be happy to answer any of your questions, and Romy will join me for the harder ones.
