Mortgage holders can cope with loan renewals, banks say

financialpost.com:

With about 14 per cent of Canadian mortgage holders set to renew their loans this year, the chief executives of the country’s big banks say they’re confident the resulting interest-rate hikes won’t crush customers or lead to a wave of defaults.

Several bank chief executive officers suggested Tuesday that customers can expect to pay somewhere in the range of $5,000 more per year on average, but said Canadians are sitting on savings, earning higher wages and ready to slash their discretionary spending to avoid giving up their homes.

The executives, speaking at a conference in Toronto hosted by RBC Capital Markets, continued to strike a cautious tone on the Canadian economy and its prospects for a soft landing. But they also projected a decline in interest rates later this year, a factor that should work in the favour of the large majority of mortgage holders whose loans come up for renewal next year, in 2026 or after.

Royal Bank of Canada CEO Dave McKay said he “fully expects” that interest rates “will come down significantly by 2025 and 2026.” But in the meantime, he said, the lender’s customers who’ve already faced renewals have been able to absorb higher monthly costs — a trend that should continue this year.

For monthly payments in 2024, McKay said, “we expect roughly a $400 payment increase to the average mortgage holder in Canada.” That’s about the same as what borrowers saw last year when they renewed, and they’ve so far been able to handle the hikes “very well,” he said.

Bank of Nova Scotia CEO Scott Thomson said he expects his clients to see increases of $400 to $500 a month, while his counterpart at Canadian Imperial Bank of Commerce, Victor Dodig, said the hikes could be $300 to $700.

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