Q: Re: the Bank 30Yr Mortgage Amortization Question asked by James... Could you explain the impact of more or less 30Yr Amortiztion Motgages ? Why is it important ? Also how would you rank the Cdn banks for purchase now and which could recover the best ? Which likely has the lowest impact from mortgages renewing ? Thank you.
5i Research Answer:
RY bank does not offer mortgages that can go into negative amortization, to our knowledge. Basically, the longer the term, the more risk, as a borrower could see job losses, higher interest rates, a recession, a house price decline or other 'event' that changes either their ability to pay or the loan to value ratio. Whenever lending money, a shorter term is simply less risky. Long dated assets are more inversely sensitive to interest rates, so 30-year mortgages (as an asset to the bank) are simply worth 'less' than shorter term loans. We would rank: RY, TD, BNS, BMO, CM, NA