Nearly three-quarters of CIBC's variable-rate clients have reached their trigger rate

  3/1/2023 |   SHARE
Posted in Mortgage Interest Rates by Anthony (Tony) Barone | Back to Main Blog Page

CIBC Office

Over 70% of CIBC’s variable-rate customers are seeing all of their mortgage payments go towards servicing interest costs.

In its first-quarter earnings release, CIBC said that of its $72-billion variable-rate mortgage portfolio, $52 billion “relates to mortgages in which all of the fixed contractual payments are currently being applied to interest” as of January 31. For those whose payments can’t meet their contractual payment obligations, that amount is being re-applied to the principal, the bank said.

With a third of its mortgage portfolio having variable rates, CIBC, like several of the other big banks, has seen its mortgage amortization periods soar.

Over a quarter (27%) of CIBC’s residential mortgage portfolio now has an effective amortization of 35 years or longer, the bank reported as part of its Q1 earnings release.

Remaining amortizations for CIBC residential mortgages

  Q1 2023 Q1 2022
20-25 years 31% 45%
25-30 years 17% 27%
30-35 years 3% NA
35 years and more 27% NA



This table summarizes the remaining amortization profile of CIBC’s total
Canadian residential mortgages based upon current customer payment amounts.


“Small portion” of mortgage clients at higher risk

Despite variable-rate customers having seen their rates surge as a result of the 425-basis points of Bank of Canada rate tightening, CIBC says the quality of its portfolio remains strong.

“Our variable rate mortgage portfolio accounts for a little over one-third of our mortgage portfolio and shows strong credit quality and performance,” Frank Guse, the bank’s Chief Risk Officer, said during a conference call.

He confirmed that $22 billion worth of fixed mortgages and $9 billion of variable-rate mortgages will be renewing over the next 12 months, and that the majority of those clients remain in good shape financially.

At renewal, CIBC mortgages revert to the original amortization schedule, which may require additional payments.

“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 and whose LTVs are in excess of 70%,” he said. “We actively monitor our portfolios and proactively reach out to clients who are at higher risk of financial stress.”

Guse also reiterated that the bank anticipates delinquencies and write-offs to “revert towards pre-pandemic levels.”

In the quarter, the bank saw the percentage of mortgages that are 90-days past due rise to 0.16%. That’s up from 0.13% in the previous quarter, but still below the delinquency rate of 0.17% seen in Q1 2022.

Source: Canadian Mortgage Trends

Variable Rate Mortgages

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