Quote:
Originally Posted by casper
I don't think we are going to see massive disruption to individuals from the mortgage rate renewal cliff. The government has changed the rules and is likely encourage the banks to show flexibility at renewal. Some people are going to end up with crappy mortgages that have them extending repayment out to retirement. That said, those mortgages will come up for renewal again in a few years.
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The massive disruption comes in the form of greatly increased mortgage interest costs at renewal, which many households spoiled by past low teaser rates and strained by inflation isn't necessarily prepared for. This will likely force many households to cut back significantly on consumption and be a drag on the Canadian economy in late 2024 and 2025, especially if the US Fed isn't in a position to significantly cut rates. At the end of the day, mortgage is a recourse loan in most of Canada, so come hell or high water, Canadians will burn through every other option before opting to default on their mortgage.
OFSI's actively working to reduce negative amortization mortgages and keep a leash on amortization periods to control systematic banking system risk, so in reality the government can't just "change" the rules to force flexibility on banks, unless the Trudeau government decides to actively interfere with OFSI's mandate and severely weaken OFSI's regulatory power.