One-fifth of CIBC mortgage borrowers seeing loan balances grow because of higher interest rates
Twenty per cent of Canadian Imperial Bank of Commerce mortgage holders are seeing their loan balances grow, as rising interest rates make it harder for them to pay off their homes.
New data from CIBC show that $52-billion worth of mortgages – the equivalent of 20 per cent of the bank’s $263-billion residential loan portfolio – were in a position where the borrower’s monthly payment was not high enough to cover even the interest portion of the loans. The bank has allowed these borrowers to stretch out the length of time it takes to pay off the loan, which is known as the amortization period. As well, borrowers are adding unpaid interest onto their original loan or principal.
The disclosure, contained in a footnote in CIBC’s recent quarterly financial results, is the first from a major bank outlining the amount of variable-rate loans where payments no longer cover interest costs.
It shows the financial duress homeowners are under because of the jump in interest rates. It also highlights the growing risk borrowers face when it comes time to renew their mortgages and their amortization periods are required to shrink back to the lengths of time specified in the original contracts. Then, the borrower will face much higher monthly payments.
“It’s absolutely a sign of stress to come. It’s just the stress isn’t here yet,” said Mike Rizvanovic, financial services analyst with investment bank KBW.
CIBC and most of the other big Canadian banks offer variable-rate mortgages that have fixed monthly payments. That means when interest rates increase, more of the borrower’s fixed monthly payment is used to cover the interest expense. The borrowers’ payments remain steady because their amortization periods are automatically extended.
Borrowers can reach a trigger rate, which often requires them to make higher monthly payments so that they are always reducing the size of their loan.
But CIBC’s variable-rate product allows borrowers to go past the trigger rate and stick with payments that don’t cover the full amount of the interest owed, up to a certain threshold. The unpaid portion of the interest is deferred and added to the mortgage principal and the borrower’s loan balance grows, or negatively amortizes.
Asked whether borrowers with negative amortizations will be able to handle the higher mortgage payments at renewal time, CIBC pointed to comments its chief risk officer said on its recent conference call.
“At this time, we still only see a small portion, less than $20-million, of mortgage balances with clients we see as being at higher risk from a credit perspective,” Frank Guse said.
“We actively monitor our portfolios and pro-actively reach out to clients who are at higher risk of financial stress,” he said according to a transcript provided by CIBC. “Overall, our mortgage portfolio is well positioned and continues to perform well within our expectations.”
At least two other major lenders, Toronto-Dominion Bank and Bank of Montreal, offer similar products that allow mortgages to negatively amortize. However, TD and BMO did not provide any disclosure on the share of borrowers that have a negative amortization. TD did not respond to a query on the matter. BMO spokesman Jeff Roman said its “reporting methodologies are in accordance with industry guidelines.”
CIBC’s filing, for the first quarter that ended in January, is the only one to provide increased transparency on the impact of higher interest rates on its variable-rate portfolio. The same filing said that in the fourth quarter, $39-billion worth of mortgages were negatively amortizing. That grew to $52-billion in the first quarter, said the footnote in the filing. Last summer, the bank said its borrowers were not yet putting unpaid interest onto the principal.
“Higher mortgage rates have resulted in a greater portion of fixed-payment variable mortgages where the monthly mortgage payment does not cover interest and principal,” said Nigel D’Souza, financial services analyst with Veritas Investment Research. “The full impact of higher mortgage rates will be reflected on renewal,” he said.
Today, the Bank of Canada’s benchmark interest rate is 4.5 per cent compared with 0.25 per cent a year ago.
The most recent quarterly filings from the big banks show that a chunk of their mortgage loans have amortization periods of more than 30 years.
At BMO, the proportion of residential mortgages with amortization periods longer than 30 years reached 32.4 per cent in January. At CIBC, the percentage was 30 per cent. At TD it was 29.3 per cent and at Royal Bank of Canada, it was 25 per cent, according to their regulatory filings.
Mr. D’Souza said the payment increase or shock at the time of renewal will be higher for negatively amortizing mortgages compared with variable-rate products that do not have fixed monthly payments and have faced payment increases with every Bank of Canada interest rate hike.
A Game-Changing Factor to Job Search: Your Ability to Make Human Connections
This column will be a departure from my usual job-searching topics to focus on something crucial to a successful job search and your career momentum, especially when networking and interviewing: making human connections.
“The most important things in life are the connections you make with others.” – Tom Ford, American fashion designer.
Genuine human connections lead to positive energy exchange and trust building. Since most job search activities involve interacting with people, projecting positive energy and being seen as trustworthy greatly benefits you.
According to American psychologist Abraham Maslow’s Hierarchy of Needs, love and belonging are the most essential needs we must fulfill, besides food, water, and safety. We are more fulfilled when our needs for love and belonging are met.
We live busy lives, juggling work, family responsibilities, self-care, side hustles, and more. Therefore, often our social connections fall by the wayside. You might not think connecting with others is important, but it is. Social connections can lower anxiety and depression, help regulate emotions, increase self-esteem and empathy, and improve your immune system. These are huge pluses when job hunting.
Sadly, we live in a time when there is a great deal of disconnection. While technology gives the appearance we are more connected than ever, the screens around us disconnect us from nature, ourselves, and those around us. Rather than using technology, especially social media, to enhance our human connections, we use it to replace them.
Being brave, proactive, and taking chances is often required to make human connections. Striking up a conversation with a stranger can be intimidating, requiring you to step out of your comfort zone. Your lowest-hanging fruit is to reconnect with current friends and family. Then venture out and try new activities, such as joining a club or taking classes, to meet people to build a relationship with.
Putting yourself out there will ultimately pay off in the form of a rewarding feeling that comes from building human connections. Here are six simple ways you can create human connections.
Surround yourself with people with shared interests.
It is easy to bond with people who share your interests and hobbies. Identifying commonalities between your interviewer and yourself is the most straightforward way to bond with your interviewer, which will give you a competitive advantage.
Do you love reading? Join a local book club. Are you a runner? Join a running club. Go where people who share your interests and beliefs are, such as clubs, volunteering, sports, taking classes, church, or sitting on an advisory board.
Overcome your resistance.
Building relationships is often intimidating because of a natural fear of rejection. However, to make human connections, you must overcome your limiting beliefs causing your resistance to change, and embrace situations outside your comfort zone.
The best way I know how to lower your anxiety when meeting new people is to remember showing interest is a massive gesture to anyone you meet. Therefore ask open-ended questions about the other person and make your discussion all about them.
TIP: When meeting someone for the first time, ask yourself, “How can I help this person?”
Smile and give off a positive attitude.
People prefer positive emotions to negative ones when forming a social connection; therefore, first impressions count.
A positive demeanor and a genuine smile will naturally draw people to you. Before spending time with others, I find doing a gratitude exercise and taking a few minutes to reflect on the good things in my life helpful in creating a positive attitude.
Putting your best self forward will maximize your chances of being a people magnet.
If you want to make friends more easily, allow yourself to be more vulnerable with others. This does not mean dropping all filters or boundaries. Too much, too soon, can put people off. On the other hand, you do not want to be an overly edited version of yourself and thus come across as not being authentic.
People can sense whether or not someone is genuine, so let them see the most authentic version of you. Your vulnerability will also prompt them to feel comfortable around you and connect with you on a deeper level.
Do not hide behind your phone.
In social situations where you are uncomfortable, hiding behind your phone is easy, preventing you from making real-life connections.
Being on your phone during a party or networking event makes you less approachable. Whenever you are out, focus on being present and engaging with the people around you.
Stay in touch.
Human connections need to be nurtured. Regular contact deepens your connections.
If you make a new friend, keep in touch with them and grow your friendship. Likewise, maintain your existing relationships with friends, family, and colleagues by keeping in touch.
Making and maintaining human connections is an activity you should prioritize if for no other reason than the fact that opportunities (e.g., jobs, friendships, love) exist all around you; the only caveat is they are connected to people. Therefore, the more people you are connected to, the more opportunities you will be exposed to.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers “unsweetened” job search advice. You can send Nick your questions to email@example.com.
First Citizens acquires troubled Silicon Valley Bank – CP24
North Carolina-based First Citizens will buy Silicon Valley Bank, the tech industry-focused financial institution that collapsed earlier this month, rattling the banking industry and sending shockwaves around the world.
The deal could reassure investors at a time of shaken confidence in banks, though the Federal Deposit Insurance Corp. and other regulators had already taken extraordinary steps to head off a wider banking crisis by guaranteeing that depositors in SVB and another failed U.S. bank would be able to access all of their money.
Customers of SVB will automatically become customers of First Citizens, which is headquartered in Raleigh. The 17 former branches of SVB will open as First Citizens branches Monday, the FDIC said.
European shares opened higher Monday, with German lender Commerzbank AG up 2.4% and BNP Paribas up 1.2%.
Investors worry that other banks also may crumble under the pressure of higher interest rates. On Friday, much of the focus was on Deutsche Bank, whose stock tumbled 8.5% in Germany, though it was back up about 3.6% in early trading Monday. Earlier this month, shares of and faith in Swiss bank Credit Suisse fell so much that regulators brokered a takeover of by rival UBS.
In the U.S., SVB, based in Santa Clara, California, collapsed March 10 after depositors rushed to withdraw money amid fears about the bank’s health. It was the second-largest bank collapse in U.S. history after the 2008 failure of Washington Mutual. Two days later, New York-based Signature Bank was seized by regulators in the third-largest bank failure in the U.S.
In both cases, the government agreed to cover deposits, even those that exceeded the federally insured limit of $250,000, so depositors were able to access their money.
New York Community Bank agreed to buy a significant chunk of Signature Bank in a $2.7 billion deal a week ago, but the search for a buyer for SVB took longer.
The sale announced late Sunday involves the sale of all deposits and loans of SVB to First-Citizens Bank and Trust Co., the FDIC said.
The acquisition gives the FDIC shares in First Citizens worth $500 million. Both the FDIC and First Citizens will share in losses and the potential recovery on loans included in a loss-share agreement, the FDIC said.
First Citizens Bank was founded in 1898 and says it has more than $100 billion in total assets, with more than 500 branches in 21 states as well as a nationwide bank. It reported net profit of $243 million in the last quarter. It is one of the top 20 U.S. banks and says it is the largest family-controlled bank in the country.
Shoppers Drug Mart moves away from medical cannabis, will send patients to Avicanna – CTV News
Shoppers Drug Mart Inc. is moving away from its medical cannabis distribution business and preparing to transfer patients to a platform run by biopharmaceutical company Avicanna Inc.
The pharmacy chain owned by Loblaw Companies Ltd. announced the shift Tuesday, but did not say what prompted the change or how much money Toronto-based Avicanna is paying for Shoppers to refer patients to its MyMedi.ca platform.
“We are grateful for the trust placed in us by our medical cannabis patients over the past few years, and are confident we’ve found the right partner in Avicanna to continue to support them,” said Jeff Leger, Shoppers’ president, in a statement.
His company will start to send customers to Avicanna’s platform in early May, with all of the patients set to be off-loaded from Shoppers’ medical pot service by the end of July. Customers will be able to place orders on Shoppers’ website through the transition period.
Avicanna said it will offer a similar range of products including various formats, brands and “competitive pricing.” Like Shoppers, its online medical portal will strive to educate customers around harm reduction and provide specialty services for distinct patient groups like veterans.
Shoppers first launched its medical cannabis business in Ontario in January 2019, months after recreational pot was legalized in Canada (medical pot was legalized in Canada in 2001) at a time when many predicted the weed sector would be booming in the coming years.
The sector has instead struggled with profitability and as high numbers of recreational cannabis shops cluster in several cities, many retailers and licensed producers have had to drop their prices to stay competitive.
However, Shoppers said it racked up tens of thousands of patients in its four years of existence, providing them with access to cannabis from more than 30 brands including Aphria Inc., Hexo Corp.’s Redecan and the Green Organic Dutchman.
Shoppers’ medical cannabis patients were required to obtain a prescription from a licensed health care provider such as a doctor to begin ordering pot from the company, which shipped orders to their homes.
But the company was unhappy with how medical pot regulations limited its model. Shoppers claimed Tuesday that medical cannabis remains the only medication that is not dispensed in pharmacies.
“As we move away from medical cannabis distribution, we remain firm in our belief that this medication should be dispensed in pharmacies like all others and will continue our advocacy to that end,” said Leger.
Avicanna’s statement did not outline its feelings on the matters, but its chief executive said it was “motivated” to “put our full efforts toward advancing medical cannabis and its incorporation into the standard of care.”
“We are thankful to be selected as the partner for this transition and look forward to introducing MyMedi.ca, supporting patients and providing them with continuity of care,” said Avicanna chief executive Aras Azadian in a statement.
This report by The Canadian Press was first published March 28, 2023
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