{"id":10960,"date":"2023-03-06T05:27:15","date_gmt":"2023-03-06T13:27:15","guid":{"rendered":"https:\/\/www.stevesaretsky.com\/?p=10960"},"modified":"2023-03-06T06:14:16","modified_gmt":"2023-03-06T14:14:16","slug":"extend-and-pretend","status":"publish","type":"post","link":"https:\/\/www.stevesaretsky.com\/2023\/03\/news\/extend-and-pretend\/","title":{"rendered":"Extend and Pretend"},"content":{"rendered":"\n
Happy Monday Morning!<\/p>\n\n\n\n
Canadian banks reported first quarter earnings this past week. Those earnings provided an important glimpse into what\u2019s shaping the nations housing market. Deep in the footnotes, CIBC reported<\/a> that $52-billion worth of mortgages \u2013 the equivalent of 20% of the bank\u2019s $263-billion residential loan portfolio were in a position where the borrower\u2019s monthly payment was not high enough to cover the interest portion of the loans. The bank has allowed these borrowers to stretch out the length of time it takes to pay off the loan, which is known as the amortization period. As well, borrowers are adding unpaid interest onto their original loan or principal.<\/p>\n\n\n\n CIBC isn\u2019t alone. Both TD and BMO also allow mortgages to negatively amortize. Assuming you took out a fixed payment variable rate mortgage at TD, you can allow outstanding interest to be tacked onto the balance of the loan, so long as your loan-to-value ratio does not exceed 80%. In other words, defer any pain resulting from higher interest rates. As a result, amortizations are growing. At TD bank, 25.2% of their residential mortgages now have an amortization of 35 years or greater. A year ago, that number was essentially zero.<\/p>\n\n\n\n