Canada’s big six banks will allow mortgage payment deferrals for up to six months as part of extraordinary measures to help customers struggling with the financial impacts of the novel coronavirus pandemic.
In a tweet on Wednesday morning, Neil Parmenter, president of the Canadian Bankers Association, said the measures are “effective immediately.” RBC, TD, BMO, Scotiabank, CIBC and National Bank will also offer “opportunity for relief” on other credit products.
Effective immediately @BMO @cibc @nationalbank @RBC @scotiabank @TD_Canada offer support for Cdns impacted by #COVID19 incl. a 6-month payment deferral for mortgages, & opportunity for relief on other credit products. Talk to your bank
— Neil Parmenter (@neilparmenter) March 18, 2020
In a joint press release, the big six banks said they are committed to working with retail and business customers on a case-by-case basis to provide “flexible solutions” for those facing hardship due to the disruptions caused by COVID-19.
The announcement comes as Canada’s housing agency, the Canada Mortgage and Housing Corporation (CMHC), has been working to ensure struggling homeowners aren’t forced into default during the health-care emergency.
“The message that CMHC is putting out is just that no Canadian should default as a result of this health crisis,” said James Laird, president of CanWise Financial, an independent mortgage brokerage.
On Monday, CMHC announced it would bring back a revised version of the Insured Mortgage Purchase Program it used during the 2008-09 financial crisis. The government plans to purchase up to $50 billion worth of insured mortgage pools.
The move, CMHC said, is meant to “provide stable funding to banks and mortgage lenders in order to ensure continued lending to Canadian consumers and businesses.”
Deferred mortgage payments are typically added back to the mortgage amount, meaning borrowers are simply postponing — not skipping — payments.
Mortgages with other lenders
For insured mortgages, there are a variety of tools that can help borrowers stave off default.
Possible solutions include allowing borrowers to defer or temporarily reduce payments, stretching out the mortgage term or amortization period, adding missed payments back onto the mortgages and lowering the mortgage rate.
Canada’s three providers of mortgage default insurance, which include CMHC as well as Genworth Canada and Canada Guaranty, which are private, are stepping up efforts to help struggling homeowners amid the novel coronavirus emergency.
Canada Guaranty announced on its website it’s ready to extend its Homeownership Solutions Program to allow the deferral of up to six monthly payments, up from a current limit of four payments.
In Canada, homebuyers with a down payment of less than 20 per cent must have mortgage default insurance.
For uninsured mortgages, many lenders offer flexible payment options, often allowing borrowers to avoid making one or more regular payments per year without affecting their credit rating.
Flexible payment options may be special features attached to specific kinds of mortgages or standard offerings available on all mortgages, depending on the lender.