Canadian Imperial Bank of Commerce (CIBC) chief executive Victor Dodig has stated that the accommodations his bank is making for variable-rate mortgage borrowers who have seen their borrowing costs spike are "sustainable for the foreseeable future."
Accommodations for Variable-Rate Mortgagors
At the end of its most recent quarter, CIBC had about $52 billion of variable-rate mortgages with monthly payments that weren’t covering even the interest portions of the loans. The bank was allowing borrowers to extend amortization periods to make up for it.
Sustainable Solutions
Dodig said that such accommodations can continue because most borrowers have significant equity in their homes and built up extra savings during the pandemic. Canadian regulations also required many homeowners who borrowed years ago to qualify at today’s higher rates, meaning they have the ability to make higher payments.
"In an interview," Dodig stated, "our clients are making rational decisions. They’re either adjusting their payments, or they may be extending their amortization. For those that are renewing, they’re renewing on a shorter-term basis because they believe that interest rates may decrease."
The Importance of Equity and Savings
Dodig emphasized the significance of equity in homes and built-up savings in enabling homeowners to make adjustments to their mortgage payments. He noted that many Canadians have accumulated wealth during the pandemic, which has allowed them to adapt to rising interest rates.
"It’s not just about the interest rate; it’s also about the ability of our clients to absorb those changes," Dodig said.
A Response to Rising Interest Rates
The accommodations made by CIBC and other banks are a response to one of the most aggressive rate-hiking campaigns in the Bank of Canada’s history. The central bank has raised interest rates multiple times in recent months to combat high inflation, which has led to higher borrowing costs for homeowners with variable-rate mortgages.
Rational Decision-Making
Dodig emphasized that homeowners are making rational decisions in response to the rising interest rates. "Our clients are adjusting their payments, extending their amortization, or renewing on a shorter-term basis," he said.
This approach is sustainable because it takes into account the unique circumstances of each borrower. By allowing homeowners to adjust their mortgage payments and amortization periods, banks can help them navigate the challenges posed by rising interest rates.
A Commitment to Supporting Homeowners
CIBC’s commitment to supporting homeowners in this challenging environment reflects its long-standing dedication to customer service. The bank has a history of innovation and adaptability, which enables it to respond effectively to changing market conditions.
As Dodig noted, "Our clients are at the center of everything we do. We’re committed to helping them navigate these changes and making sure they have the tools they need to succeed."
Conclusion
In conclusion, CIBC’s accommodations for variable-rate mortgage borrowers are sustainable for the foreseeable future because most homeowners have significant equity in their homes and built-up savings during the pandemic. Canadian regulations also require many homeowners who borrowed years ago to qualify at today’s higher rates, enabling them to make higher payments.
As Dodig stated, "Our clients are making rational decisions. They’re either adjusting their payments, or they may be extending their amortization. For those that are renewing, they’re renewing on a shorter-term basis because they believe that interest rates may decrease."
By providing flexible mortgage options and adapting to changing market conditions, CIBC is committed to supporting homeowners in this challenging environment.
References
- Bloomberg.com
- Financial Post
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Disclaimer
The information provided in this article is for general informational purposes only. It should not be considered as investment advice or a recommendation to purchase any financial product. Always consult with a financial advisor before making any decisions about your mortgage or investments.
