Doubling the risk of mortgage loans amid high interest rates

According to new research by the Canada Mortgage and Housing Corporation, risk in the mortgage market has more than doubled since 2019. In a report released Wednesday, the company attributed the increase in risk largely to the Bank of Canada's interest rate hike. It started from 2022, he attributed. In this report, it is stated that, in the current interest rate conditions, most of the mortgage loan holders are in uncertain financial conditions.

Also, more than eight percent of home owners are unable to pay their mortgage loan and meet the basic needs of life. This report shows that increasing the loan payment period from 30 to 40 years will only reduce the monthly mortgage loan payment by five percent. Increasing amortization schedules are effective when interest rates are low.

In March 2022, the Central Bank introduced the first of 10 interest rate hikes to curb unprecedented inflation. Since then, the central bank has increased the lending rate from 0.25 percent to the current 5 percent and the mortgage loan rate to 6.5 percent and above.

As of February 2024, mortgage loan growth has reportedly hit a 23-year low. Although this slowdown may be short-lived, higher home sales and prices in the coming years—due to lower mortgage rates, population growth, and rising wages—could lead to faster growth in mortgage debt.

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