“It gave me hope,” said Merle. “I thought, ‘Well, it will be a bit of a break.’ “
But her relief quickly turned to frustration and then anger when she learned the details of the deferred mortgage program her bank, CIBC, was offering.
Mortgage payments can be deferred for up to six months – but interest on those payments will be added to the outstanding balance, forcing customers to pay interest in addition to deferred interest and increase the total cost of borrowing.
For the Blackbirds, this means deferring their mortgage payments for four months will cost them an additional $ 7,400 in interest.
“It’s a public relations stunt, in my opinion,” said Merle. “The way they boast about deferrals as if they were our heroes in one way or another, while” helping “us, as a country, to accumulate more personal – and fabricated – debts.”
It’s not just CIBC that offers a deferred mortgage that adds accrued interest to the principal and then applies interest – the big six banks implemented similar programs after the federal finance minister, Bill Morneau, asked them to defer mortgage payments for up to six months to people with financial difficulties to COVID-19.
Canadians have more than $ 1.6 trillion in mortgage debt, about 65% of total household debt.
According to the Canadian Bankers Association (CBA), 600,000 Canadians have asked their banks for deferred mortgages or to skip a payment, and with new figures showing that a million Canadians lost their jobs last month, that number should increase.
“It feels greedy,” said Merle. “We have to focus on everyone’s success. And it looks like the banks are stealing from this. “
In a statement to CBC News, a spokesperson for CIBC said, “Customers have the option of paying accrued interest at the end of the period or adding unpaid interest to their mortgage,” adding that those who defer a six-month mortgage “will benefit from an average of $ 10,000 in immediate relief from payments, which can be very useful at a critical time.” ”
Sidra Liaqat of Calgary is a freelance caregiver who is now unemployed due to the pandemic and has reluctantly decided to defer payments on her RBC mortgage for six months, which will cost her an additional $ 5,300 in interest charged on the principal deferral and interest.
“Basically, it’s just the bank that benefits from this emergency,” said Liaqat, who says it will be hard pressed to make ends meet. “I don’t think it’s fair. It is not fair. And I think something should be done about it. “
In a statement to CBC News, RBC did not respond to Liaqat’s concerns, but said, “We have contacted over 250,000 Canadians to offer mortgage, credit card and loan relief through deferrals from payment of principal and interest.
Call for a temporary halt to mortgage payments
A banking watchdog says Canadian financial institutions need to take more action to help people hard hit by the pandemic.
“The banks are doing the minimum now,” says Duff Conacher, co-founder of Democracy Watch. “And the federal government should ask them now to do much more.”
Conacher says not only should banks not charge mortgage interest in addition to interest, but now is the time for them to give up some of their “narcotic” profits and temporarily give up mortgage payments.
“Mortgage deferrals only accumulate more debts on people later. So the banks aren’t really going to lose a dollar, ”says Conacher.
“And what should happen instead is that people’s loan payments should just be stopped now – and the banks could afford to do it. “
Merle likes this idea.
“I think there would be merit in a forgiveness-type program for the next three months,” she said. “And I don’t think it would be very detrimental to the banking sector. “
Conacher points out that the big six Canadian banks together made $ 46 billion in profits last year – the tenth consecutive year that their profits have increased.
Conacher calls it “excessive”, and says it is the highest in the world.
He launched an online campaign calling on the federal government to act quickly during this crisis and ask the banks to reveal exactly where they are making their profits.
“The federal government and the public really do not know where exactly the banks’ profits come from,” said Mr. Conacher. “So the government should ask them to cut [mortgage] payments right now and don’t add those payments later – unless the banks can prove they need these loan payments to make a profit. ”
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CBC News has asked the bankers’ association to defer mortgage payments entirely.
In a press release, CBA spokesperson Mathieu Labrèche did not answer this question, but wrote that “the postponements provide immediate relief to people and can help cushion the sudden effects of the effect. of COVID-19 on the Canadian economy ”.
With data from the Canada Mortgage and Housing Corporation (CMHC) showing that the average monthly mortgage payment for homeowners is $ 1,326, the CBA calculates that bank mortgage deferrals total about $ 778 million per month.
“It keeps money in the pockets of people who need it now,” wrote Labrèche. “This number will increase in the coming weeks as more requests for deferrals will be handled by banks of all sizes. “
CBC News also asked, in light of the latest record unemployment figures, if the banks were considering further measures to support families financially devastated by the crisis. This issue has also not been addressed.
In recent weeks, the federal government and the Bank of Canada have announced that they will inject at least $ 150 billion into Canadian banks and mortgage lenders to ensure they have the cash available to continue lending while buying. pools of mortgage loans insured through CMHC.
Against this backdrop, Prime Minister Justin Trudeau calls on banks to provide more economic relief during the pandemic – to homeowners, small business owners and others – saying at a press conference earlier this week that his government has had discussions with the banks.
“We are pleased that the banks have taken some initial steps, but we know they can do more and we would like to see more,” said Trudeau.
“Every day, we see that this crisis is becoming a major challenge for everyone. “
Frustration with the banks boiled over on Twitter, with people – mostly small business owners – using the hashtag #tooslowmorneau to urge the Minister of Finance to put more pressure on the banks to bring them financial relief.
Deferred mortgages as a last resort
Meanwhile, personal finance experts warn that Canadians should only request a mortgage deferment once all emergency funds and government programs such as Employment Insurance and the Canadian Intervention Benefit have been applied. ‘urgency (CERB) – who pay $ 2,000 a month for up to four months to people who have “lost all their income due to the pandemic” – have been exhausted.
“It would be your last resort,” said Scott Hannah, President and CEO of the Credit Counseling Society of Vancouver, who calculates that deferring payments could add another six months to an additional year so people can pay off their mortgages.
He recommends that people carefully examine financial budgets and try to cut all costs that are not necessities. Once done, says Hannah, a postponement might be the best choice for some people.
“Better to do it today,” he said, “than to have your house sold, which would be the worst thing to do given the uncertainty in the market. “
WATCH | Operation of the emergency benefits program
Hannah said he understands that clients may be unhappy with the extra cost of borrowing in times of crisis, but says people need to realize that banks operate in “unknown waters”, unlike the financial crisis of 2008/09.
“Because we knew what caused it, we knew what steps were being taken to fix it,” says Hannah. ” It’s new. It came out of nowhere and is killing people. So you have this panic mentality, and that forced all the financial institutions to scramble, and that caught them off guard. “
Merle said she had not received confirmation that her mortgage deferral request had been accepted, but that the usual monthly payment had not left her bank account last week.
It’s a bittersweet relief, she said, given how much more it will cost her – and hundreds of thousands of other owners – once the deferral period is over and payments are resumed.
“I think original creative thinking is necessary, and I would just ask the banks to do it,” said Merle.