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Amortization times for variable rate mortgages are increasing:

The growing proportion of mortgages with long amortizations gives an indication of the number of borrowers who could face significant hikes to monthly payments when they renew their loans. Currently, the bulk of variable-rate borrowers have fixed monthly payments and are not seeing their payment immediately spike with every Bank of Canada interest rate hike. But when they renew their mortgage, they will face a much higher monthly payment.

At Royal Bank of Canada, Bank of Montreal and Canadian Imperial Bank of Commerce, the percentage of mortgages with an amortization of more than 30 years has grown to around 30 per cent as of the end of October, according to their quarterly results released this week. (RBC hit 27 per cent, BMO reached 31.3 per cent and CIBC was at 30 per cent.)

That is a huge jump compared to October of last year, when the three banks had no mortgages with an amortization above 30 years, according to their financial disclosures.

At the end of July, mortgages with terms of over 30 years accounted for one quarter of the three banks’ residential mortgage portfolios. At the end of April, those loans made up 10.6 per cent of BMO’s portfolio, and 12 per cent of mortgages at RBC and CIBC.

Toronto-Dominion Bank’s financial report disclosed that 28.9 per cent of its mortgages had terms over 30 years as of the end of October. Previously, TD has not disclosed amortization periods that have stretched beyond the mortgage’s original contract. Its second and third quarter results showed the share of mortgages with their original amortizations, and only 1 per cent of its loans had terms greater than 30 years.

This entry was posted on Thursday, December 1st, 2022 at 9:03 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.