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Banks warn thousands would default on mortgage payments

Tens of thousands of borrowers could be vulnerable to defaulting on their mortgages as rates rise and homeowners struggle to make monthly payments, according to the CEOs of the nation's largest banks.

Scotiabank's incoming CEO said about 20,000 of the bank's borrowers could be vulnerable, representing about 2.5% of the bank's mortgage customers.

CEOs at several of Canada's other big banks also said small percentages of their borrowers are at risk, which could add up to tens of thousands of Canadians.

On top of that, millions of other bank borrowers are likely to face financial difficulties this year and next as they renegotiate fixed-rate mortgages or make ever-higher monthly payments on variable-rate loans.

Still, bank CEOs, speaking at a one-day conference organized by RBC, emphasized that they don't expect a wave of mortgage defaults to seriously affect their own bottom lines.

The CEOs said household savings accumulated during the pandemic, a strong job market and a general increase in home values in recent years should provide a cushion for most of their mortgage customers.

They said only a small percentage of borrowers (BMO's Daryl White estimated it at 1% for his bank, while RBC's Dave McKay pegged it in the "low single-digit percentage" range) are "vulnerable" to default.

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