Mortgage growth buckles under weight of rate hikes in Canada
BNN Bloomberg
The aggressive pace of interest-rate hikes is hitting mortgage books at Canada’s biggest banks, leading to slowing loan growth, longer amortization periods and a rise in impairments.
Higher borrowing costs cut into mortgage growth, with would-be homebuyers sitting on the sidelines. At the country’s five largest lenders, including Royal Bank of Canada and Toronto-Dominion Bank, residential loan growth slowed to 4 per cent in the fiscal third quarter, compared with annual growth of 9.8 per cent a year earlier.
Meanwhile, the amount of impaired loans in the five firms’ core Canadian banking businesses almost doubled from a year earlier. Stage 3 loans — an accounting category for loans in default that are less likely to be paid back — ballooned to nearly $1.3 billion (US$960 million) in the three months through July from $717 million a year earlier.
Royal Bank and Toronto-Dominion had the largest Stage 3 totals, at $302 million and $285 million, respectively, reflecting the bigger loan books at the two banking giants. Still, the figures account for a small fraction of the lenders’ overall portfolios.
