In the short term, this gambit allows banks to delay the embarrassing possibility of insolvency. In the longer term, it may mean that mortgage holders will never own their home. Welcome to the new economy!
But with TD and CIBC variable-rate mortgages, borrowers may be allowed to go past the trigger rate and stick with payments that don’t even cover the full amount of the interest owed, up to a certain threshold. The unpaid portion of the interest is deferred and added to the mortgage principal and the borrower’s loan balance grows, or negatively amortizes.
The fact that CMHC rules allow for balances on insured mortgages to grow past the original amount raises questions, said Ben Rabidoux, founder of market-research firm North Cove Advisors.
“Is that prudent?” Mr. Rabidoux asked, saying CMHC is a “manager of risk on behalf of Canadian taxpayers” in the housing market.
There’s one problem with that last statement: central planners cannot manage risk; they exist primarily to force it upon the unwilling.
I’m sure all the other banks are onboard…
and anyone who didn’t convert to a fixed rate months ago is going to suffer
If you’re not paying down the principle then why pay anything at all? If the lenders are OK with it (their assets increase, talk about delaying insolvency…) why not cram as much on there as possible? You don’t take it with you, right? And nor do you own it as the taxes are always due. You know what, let’s throw all of the interest and the taxes on every mortgage just to be safe.
In 2006, I interviewed a Canadian who had been working in the mortgage industry in California. He told me they were underwriting mortgages where the payments didn’t even cover the interest at that time. He said it was viewed as an acceptable risk because it was generally assumed that prices would just keep increasing. We all saw how that worked out shortly thereafter.
Not to worry … Joe Biden will forgive variable rate mortgages just like student loans … because “equity” lending or something
I’m sorry, I don’t have sympathy for people who can’t pay. Get a second job or get a third job. There’s a million of them out there.
And f**k the banks because every chance they get, they’ll f**k you…or freeze your account and if possible, steal all your money and blame the government.
It should be illegal to have a debt that is not being reduced in amount by deferral (student debt) or by payments too low to even cover the interest (this idiotic idea). The Titanic sank slowly but it still sank.
tick tock
FCC has been lending money for farmland for several years now with interest-only payments.
Correction, “CMHC is a manager of risk on behalf of Canadian banks paid by Canadian taxpayers”
CMHC, Banks, and Governments all take turns screwing the taxpayer like some cheap adult porn flick.
Canadian banks saying we don’t want your money- the canadian peso is trash.
You never really own a home. Stop paying the taxes, utilities, etc and you will see what I mean.