Bank regulator in Canada warns of housing-payment shock by 2026
BNN Bloomberg
Canada’s banking watchdog warned that many homeowners who took out mortgages when rates were near zero during the pandemic will soon face a reckoning as those loans renew.
The “payment shock” faced by some borrowers is among the most important risks currently in the financial system, according to the latest risk outlook from the Office of the Superintendent of Financial Institutions, released Wednesday.
The regulator said that 76 per cent of outstanding residential mortgages as of February will be coming up for renewal by the end of 2026. Most worrisome are the 15 per cent of mortgages that have variable rates with fixed payments. Some of those loans are negatively amortizing — that is, the regular payments no longer cover the full interest costs because rates have gone up so quickly, so the principal balance is increasing.
Eventually, those borrowers have to make lump-sum payments or accept much higher monthly outlays, the regulator said.
