‘Payment shock’ to strongly steer the Canadian economy this year, says RBC’s McKay

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McKay cited the two economies’ different mortgage payment terms as a major factor in the trend. He said that Canadian institutions do not offer 30-year fixed mortgage contracts, unlike in the US.

With Canadian mortgage holders needing to renew at prevailing rates every five years at most, McKay said that this set-up has put at risk a significant number of already indebted households, as they will need to wrestle with progressively higher mortgage payments every renewal period.

The Canadian situation is made even more convoluted by the profusion of floating-rate mortgages.

“That’s been challenging for Canadians,” McKay said.

The impending wave of nearly $1 trillion in mortgage renewals by 2026 represents a significant upheaval in the Canadian financial system, according to a recent analysis by Dylan Smith, senior economist at Rosenberg Research & Associates.

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