After a sharp rise in mortgage repayment terms over the past few quarters, Canadian banks' home loans past 30 years have edged lower in the latest quarter but analysts say risks remain elevated with borrowing costs expected to stay higher for longer. The Bank of Canada's 10 interest rates since last year have triggered a spike in monthly payments for variable rate loans and in cases of fixed payments, their monthly contribution largely covered only the interest portion of their loan. That has led to a rare situation in Canada where banks are seeing mortgage amortizations getting extended beyond 30 years, sparking calls from regulators to take immediate action to mitigate risks.
TORONTO - After a sharp rise in mortgage repayment terms over the past few quarters, Canadian banks' home loans past 30 years have edged lower in the latest quarter but analysts say risks remain elevated with borrowing costs expected to stay higher for longer.
The big six banks said they have called on struggling customers giving them the option to switch to fixed-rate products, increase term payments or make a lump-sum payment as they hit the trigger rate. CIBC's CFO Hratch Panossian told Reuters in an interview that about 8,000 clients had increased their monthly payments and just over 1,000 clients made lump-sum payments, to remove their mortgage from the negative amortization status, as a result of the outreach during the third quarter.Canada's total residential mortgage debt stood at C$2 trillion at the start of the year.
Still, the risks remain elevated as consumers are struggling to make monthly payments due to the rising cost of living.
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