In the USA 15-year and 30-year mortgage terms are very common. So why not in Canada? Is it that there is less banking competition, or are there other forces at play?
Longer-term mortgages would benefit Canadian homebuyers by bringing more stability to the homebuying process, says a recent brief from the C.D. Howe Institute.
In “One More Case for Longer-term Mortgages: Financial Stability”, author Michael K. Feldman argues that mortgage periods of ten years or longer would decrease the number of renegotiations homebuyers would be required to engage in over the course of a decades-long amortization, thereby limiting their exposure to higher rates.
On the demand side, most Canadians simply don’t realize that longer-term mortgages are a possibility. “I think if you asked most people, they would think you can get a loan for five years or less, and that’s it,” Kronick says, adding that the institutions providing longer-term mortgages also charge premium rates to mitigate the losses in revenue they face from less frequent loan negotiations/interest rate hikes and early mortgage pay-offs.