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OSFI says mortgage payment shock poses a key risk to Canada’s financial system

Canada’s banking regulator says high borrowing costs and a wave of expected renewals in the coming 18 months pose key risks to Canada’s financial system.

With 76% of outstanding mortgages expected to come up for renewal by the end of 2026, OSFI says homeowners face the risk of payment shock, particularly those who took out mortgages between 2020 to 2022 when interest rates with at historic lows.

“Households that are more heavily leveraged and have mortgages with variable rates but fixed payments will feel this shock more acutely,” OSFI said in its Annual Risk Outlook for 2024-25. “We expect payment increases to lead to a higher incidence of residential mortgage loans falling into arrears or defaults.”

OSFI notes that financial institutions could face higher credit losses in the event of a weakened residential real estate market. It…

Read more at www.canadianmortgagetrends.com

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