Canadian Banks - A review of mortgage payment shock
We believe a significant number of mortgages are coming due in the next three years (around 60% of all outstanding mortgages at the Canadian chartered banks) and that payment shock (the increase in payment at renewal) could be significant and represents a tail risk to Canadian banks. Unless there are significant declines in interest rates, we believe that credit losses will inevitably rise, perhaps significantly in 2025 and beyond. This report also explores strong proactive actions by the banks that should help mitigate the shock.