Payment shocks at renewal due to shorter mortgage terms have become a growing concern for many Canadians. This has led some to question whether adopting longer mortgage terms, similar to those in the United States, would provide greater financial stability.
While Canadian lenders can theoretically provide 15-, 20-, 25-, or even 30-year mortgage terms, market realities and consumer preferences pose substantial challenges.
“The reason we don’t have long term mortgages in Canada is not because they’re illegal, it’s because within the Bank Act… banks are limited on what they can charge for prepayment penalties if you break the mortgage,” Edge Realty Analytics founder Ben Rabidoux explained at a recent conference in Toronto.
“There’s a tremendous amount of interest rate risk embedded in giving someone a 30-year mortgage and then having…
