While the President and CEO of Desjardins is aware of the worrying economic situation affecting many of his members, especially variable rate mortgage holders, he says he is coping fairly well with the situation.
• Also read: 2023 results: Surpluses and discounts increase at Desjardins
“At the moment, Desjardins' mortgage portfolio is not keeping me from sleeping,” said Guy Cormier during a conference call yesterday. He [notre portefeuille hypothécaire] is very solid. It’s very, very solid.”
The president of Desjardins responded to a question about the doubling of provisions for losses recorded by Desjardins in 2023. This increased from $277 million in 2022 to $529 million for the most recent fiscal year as of December 31.
Surprisingly, however, Desjardins Group claims to have not noticed an increase in bankruptcies among its borrowers. “Our December 2023 portfolio was roughly similar to January 2023 in terms of provisions […] We don’t see any deterioration at the moment.”
However, the man whose mandate as president has been extended until “March 2026 at the latest” says he is preparing for things to get difficult.
“We are seeing renewals of mortgages taken out in 2018, 2019, 2020 with terms of five to seven years […] Larger mortgage extensions in terms of monthly costs – we're talking $600 to $800 more per month. That’s why we’re already in proactive mode with these people.”
In 2023, Desjardins said it contacted more than 70,000 of its more vulnerable members who had taken out a variable rate mortgage in recent years.
Of the 70,000 members contacted, 80% agreed to take action or change their mortgage payment habits to better weather this period of strong interest rate growth.
It is estimated that 60% of mortgages in the country will be renewed in the next three years. In many cases, the extension occurs at a much higher interest rate than previously negotiated, resulting in a jump in mortgage payments.
According to Darko Mihelic, analyst at RBC Capital Markets, the increase in monthly payments could reach an average of 48%. Without a rate cut, variable rate mortgage holders could see payment increases of around 84% by 2026.
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