TORONTO, June 13 (Reuters) - Canada's financial regulator is urging lenders to tackle risks from mortgage extensions at the "earliest opportunity" as many borrowers try to navigate higher mortgage costs after the Bank of Canada's surprise rate hike last week.
Canada's central bank has raised interest rates to a 22-year high of 4.75% and analysts are betting on another 25 points increase next month.
The regulator had warned in April that though the short-term fix to extend mortgage payment periods helped borrowers, it would keep them in debt for longer.
As the interest rate rises, the mortgage payment no longer covers the interest payment portion, which results in the mortgage balance and negative amortization.
"We believe risks are still elevated with the prospect of more rate hikes adding to the headwind on mortgage renewals," Rizvanovic said.
Persons:
OSFI, Royce Mendes, Mendes, Mike Rizvanovic, Rizvanovic, Nivedita Balu, Denny Thomas, Nick Zieminski
Organizations:
TORONTO, Bank of, Reuters, Desjardins, Bank of Canada, Bank, Thomson
Locations:
Toronto