Canadian Homeowners Struggle with High Mortgage Costs, Bank Data Shows
Mortgage data from Canada's largest banks reveals the challenges faced by homeowners due to high borrowing costs. Royal Bank of Canada (RBC) reported that 43% of its Canadian residential mortgages had an amortization period longer than 25 years in July, a significant increase from 40% the previous year and 26% in January 2022. Similarly, Toronto-Dominion Bank (TD) witnessed a rise in mortgages with an amortization period exceeding 25 years, reaching 48% in July compared to 35% the previous year. To alleviate the burden on borrowers, Canadian banks have allowed customers to extend payment periods, resulting in higher payments for millions of borrowers following the Bank of Canada's interest rate hikes. The return of mortgages with amortization periods exceeding 35 years has also become prevalent, representing 23% of RBC's Canadian mortgage portfolio. Despite these challenges, banks like TD have reached out to stretched borrowers, offering options such as lump-sum payments, increased term payments, and the opportunity to switch to fixed rates. The Bank of Canada's recent benchmark overnight rate increase to 5% further adds to the financial strain experienced by homeowners.
High Mortgage Costs in Canada: A Potential Challenge for New Businesses
The recent data revealing the struggle of Canadian homeowners with high mortgage costs could have a significant ripple effect on new businesses.
Consumer Spending and Business Growth
With a substantial portion of Canadians devoting more of their income to mortgage payments, discretionary spending is likely to decrease. This could potentially impact new businesses, particularly those in the retail and service sectors, as they may experience slower growth and reduced consumer demand.
Impact on Business Loans
The high borrowing costs reflected in the mortgage data may also influence business loans. Banks may opt for tighter lending standards or increased interest rates for businesses, making it more challenging for new businesses to secure necessary funding.
Shift in Housing Market
Furthermore, the trend of longer amortization periods could indicate a shift in the housing market. If homeownership becomes less attainable, there may be increased demand for rental properties. This could present opportunities for new businesses in the property rental and management sector. In conclusion, while the high mortgage costs pose challenges for homeowners, they also create a complex, evolving landscape for new businesses to navigate.
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