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  • Frank Tian

Canadians Reaching Tigger Rate

Canadians heard the mortgage trigger rate a lot.

How many mortgages have reached that?

The answer from the Bank of Canada ๐Ÿ‘‡


Out of a total of 7 million mortgages:


๐Ÿ“Œ 33%~ of total mortgages are variable rates.


๐Ÿ“Œ 25%~ (75% above) are variable rates with fixed payments.


๐Ÿ“Œ 13%~ (50% above) have reached their trigger rates.


Beyond the trigger rate, the scheduled payment cannot cover newly accrued interest.


This would lead to negative amortization if the borrower cannot increase the payment.


Image source: Bank of Canada


๐ŸŸฆ The % is higher for new originations/renewal during the pandemic,


When many were drawn to variable rates in face of high housing prices.


% mortgages having reached trigger rates out of variable rate/fixed payment:


Pre-2020 origination/renewal: 25%

2020 origination/renewal: 58%

2021 origination/renewal: 70%

2022 origination/renewal: 46%


๐ŸŸง The rate hike has not stopped.


BoC estimated another 15% of variable rate/fixed payment to reach trigger rates in 2023.


That would bring the % out of total mortgages to 17%~.


Canada largely avoided the subprime mortgage crisis in 2008, but now the mortgage industry faces its own test.


In the US, subprime adjustable rate mortgage was the first to experience meaningful delinquency increase in the Great Financial Crisis.



Further reading:

Bank of Canada, Variable-rate mortgages with fixed payments: Examining trigger rates

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