With variable rates rising by the month—and more Bank of Canada hikes anticipated—observers are keeping a careful watch on adjustable-rate mortgages.
Borrowers with an Adjustable-Rate Mortgage (ARM) see their monthly payments increase every time interest rates rise (to the tune of about $25 per $100,000 for every 50 bps of rate increase, based on a 25-year amortization).
The Bank of Canada has already delivered 125 basis points of tightening this year, with another 100 to 150 bps expected.
But Scotiabank, the largest mortgage lender that offers ARMs, said during its last earnings call that it’s not concerned about its adjustable-rate portfolio in spite of the current rising-rate environment.
“We’re not worried about the credit portfolio for the [variable-rate mortgage] book,” said Dan Rees, Group Head, Canadian Banking. “The…
