Banks reducing ultra-long mortgages, Canada watchdog says
BNN Bloomberg
The rapid run-up in mortgages during the pandemic represents a “pocket of risk” to the financial system but Canadian lenders are starting to get the problem of ultra-long home loans under control, according to the country’s bank watchdog.
“During the Covid years, the principal unintended consequence of what we went through was this buildup in mortgage underwritings,” Peter Routledge, who heads the Office of the Superintendent of Financial Institutions, said Tuesday at a National Bank of Canada financial-services conference in Montreal.
“That created a risk concentration and that’s worried us really since it formed,” he said. But he added that this is a “pocket of risk. I don’t consider this risk systemic, but it could lead to a period of uncertainty in the housing system.”
At the height of a housing market boom fueled by the low-interest rate environment, banks handed out 40 per cent more home loans compared to pre-pandemic averages, he said. Plus, half of those were variable-interest rate mortgages, compared to the regular rate of less than a quarter, he said.
