Canada would be better off if pesky variable-rate mortgages with fixed payments were "less prevalent," says our banking regulator.
Oftentimes, when rates surge, their "fixed payments do not cover the interest payments and mortgage principal outstanding grows," said Superintendent Peter Routledge in a keynote speech at Thursday's Scotiabank Financials Summit.
"In fact, the contractual amortization period does not change. And mortgagors will have to make up the deferred principal paydowns when they renew. This means they are at risk of suffering a significant payment shock."
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