Static Payment Variables: Villains or Victims of a Policy Witch Hunt?

Policymakers have waged a two-pronged attack on fixed-payment variable-rate mortgages.

Last week, the BoC's Senior Deputy Governor Carolyn Rodgers came out swinging, telling Bloomberg:

I think you’ll see the industry reflect on how much they want to offer that product. It is concerning. You don’t want a big portfolio of negative amortizing mortgages. It’s not good for the banks and it’s not good for the mortgage holders."

In what seemed to be a coordinated attack, OSFI head Peter Routledge piled on last week, labelling static-payment variables "dangerous" in senate committee testimony. His stated reason: in cases where interest exceeds the borrower's payment, and their balance grows, this "increases the risk of default."

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