Finance Minister Chrystia Freeland expects Canadian banks to adhere to new guidelines aimed at supporting homeowners who are bracing for mortgage renewals amidst climbing interest rates, according to CBC News.
In an interview on CBC’s Rosemary Barton Live, Freeland voiced the concerns of numerous Canadians. “The thing that I hear the most right now is people are concerned about interest rates, especially people who have mortgages and are concerned about the renewal of their mortgages,” she said.
A recent report by Royal LePage revealed that over three million Canadians will face mortgage renewals in the next 18 months, likely leading to significantly higher monthly payments. This scenario is fuelling anxiety among homeowners, with many anticipating the need to make substantial lifestyle changes to manage the increased financial burden.
Bikramdeep Singh, a homeowner in Vancouver, shared with CBC News his concerns about a 30 to 40 percent rise in his mortgage payments upon renewal next year. “That’s going to be a significant chunk of money I’m spending every month,” Singh said. Similarly, Kevin Larkin from Surrey, B.C., expressed doubts about his ability to afford the renewal. “I’ve been running the numbers, and I don’t see how I’m going to be able to renew and afford this,” he stated.
In response, Freeland introduced a Canadian Mortgage Charter as part of the fall economic statement. This charter, although not legally binding, sets forth expectations for banks regarding mortgage support. Key measures include the option to extend amortization periods temporarily, discontinuing stress tests when switching lenders at renewal time, and waiving certain fees.
When asked about the enforceability of these guidelines, Freeland expressed confidence in the alignment of interests between the government, banks, and Canadians. “It is my hope — but also really my belief — that the banks are going to work with us, the government, and work with Canadians to act on these commitments,” she stated.
Freeland emphasized the importance of Canadians being informed about these rules and knowing what to expect when discussing their mortgages with banks. “Canadians need to know about it, that’s why I emphasize it so much,” she said, according to CBC News.
Additionally, Freeland did not rule out further measures in the upcoming spring budget and highlighted the government’s focus on improving the overall economy to enable the Bank of Canada to lower rates without reigniting inflation. Canada has seen a decrease in inflation from 8.1 percent in June 2022 to 3.1 percent last month, while the Bank of Canada’s benchmark interest rate has risen to five percent.
Meanwhile, Conservative Leader Pierre Poilievre criticized the government’s approach, particularly the $20 billion in new spending. “With this $20 billion of costly new spending, this update can be summed up very simply: prices are up, rent up, debt up, taxes up, time’s up,” he said. Poilievre vowed a no-confidence vote against what he termed a “disgusting scheme.”