At TD Securities' annual financial services conference last week, Canada's top bank cop, Peter Routledge, reminded everyone how he's not a fan of fixed-payment variable mortgages.
He told the audience, "We’re making changes to capital requirements that 1) ensure both lenders and mortgage insurers are holding adequate capital for the risks presented by negative amortization, and 2) set incentives for lenders to prevent negative amortizations to begin with. Published October 20th and coming into effect, now in fiscal Q1, 2024."
"Ultimately, these are decisions that will be made at the lender level," Routledge added, and he's right. We recently spoke with a major bank exec on background about OSFI's efforts to discourage fixed-payment variables, which are arguably misguided. He suggested there's little appetite among most banks to do away with these products.