Variable Mortgages Now Make Up More Than Half of the Market

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Mortgage debt taken on by Canadians over the last two years has surged, especially in the inherently riskier variable-rate segment. CMHC_ca realestatenews

The amount of mortgage debt taken on by Canadians over the last two years has surged, especially in the inherently riskier variable-rate segment, according to new data from the Canada Mortgage and Housing Corporation.

It reports that mortgage originations increased to a pace not seen since 2008 last year, up 9% compared to 2020. The bulk of these were uninsured mortgages , reflecting an overall higher home price environment, says the CMHC. The Bank of Canada has increased its trend-setting Overnight Lending Rate three times since March, hiking it from a record low of 0.25% to 1.5%. Larger hikes are highly anticipated to continue for the remainder of the year, which will put further pressure on borrowers who initially took out variable mortgages at historical discounts during the pandemic.

, especially in the case of a “trigger” economic event. The BoC calculated that a household that took out a variable mortgage between 2020 – 2021 would see a median increase of $700 upon renewal as rates rise.However, the CMHC’s data shows that despite hefty mortgage loads, borrowers’ financial standing appears to be in a healthier place, at least compared to 2020.

 

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