Canadian banks see dip in 30 year-plus mortgages, but risks remain

investing.com:

(In paragraph 10, corrects to say: Bank of Nova Scotia (TO:BNS), the only bank among Canada's top five to offer variable payments for its floating rate customers," instead of saying "… top five not offer...")

By Nivedita Balu

TORONTO (Reuters) -After a sharp rise in mortgage repayment terms over the past few quarters, Canadian banks' home loans past 30 years have edged lower in the latest quarter but analysts say risks remain elevated with borrowing costs expected to stay higher for longer.

The Bank of Canada's 10 interest rates since last year have triggered a spike in monthly payments for variable rate loans and in cases of fixed payments, their monthly contribution largely covered only the interest portion of their loan.

That has led to a rare situation in Canada where banks are seeing mortgage amortizations getting extended beyond 30 years, sparking calls from regulators to take immediate action to mitigate risks.

The big six banks said they have called on struggling customers giving them the option to switch to fixed-rate products, increase term payments or make a lump-sum payment as they hit the trigger rate.

For the top five banks offering variable-interest and fixed-payment options, that has resulted in mortgages with amortization of over 30 years dropping to between 23% and 29.8% in the three months ended July, from 25%-31% in the previous quarter.

When customers breach the trigger rate, all of their repayments go towards repaying interest, preparing them for a payment shock when mortgages come up for renewal. An estimated C$331 billion ($245 billion) in home loans are expected to come up for renewal next year alone.

CIBC's CFO Hratch Panossian told Reuters in an interview that about 8,000 clients had increased