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A 47-year mortgage? They’re out there — and even longer ones could be coming

When Michael Girard-Courty bought his duplex in Quebec last year, the monthly $1,156 mortgage payment was well within his budget. But since he signed on the dotted line, the Bank of Canada has hiked interest rates multiple times, which means that more of his payment is allocated toward interest — not paying down the loan at the pace he’d planned.

As things stand now, “only $23 goes to pay the capital of my mortgage and the rest is all in interest,” he told CBC News. “And my mortgage went from 25 years to 47.”

He’s not alone. 

Negative amortization happens when the monthly loan payments are no longer enough to pay down anything but interest, meaning the balance is actually growing. It can result in payment terms ballooning by years, even decades, to compensate.

Under normal circumstances, on a standard 25-year mortgage, a certain percentage of the payment goes to the bank in the form of interest, while another chunk is allocated toward paying down the principal. As the borrower makes their payments, they owe less and less money over time.

But because of the large and rapid run-up in interest rates in the last year and a half, that repayment balance has been thrown out of whack. 

Exact numbers are hard to come by, but regulatory filings from Canada’s biggest banks show roughly one-fifth of the mortgages on the books at Bank of Montreal, TD and CIBC were negatively amortizing last quarter. 

That’s around $130 billion of housing debt for which, instead of a standard 25 years, the mortgage is stretched out over 35, 40 or even more years. And with roughly 100,000 mortgages coming up for renewal in Canada every month, more are likely on the way.

This month, the Office of the Superintendent of Financial Institutions will unveil new capital adequacy guidelines for banks and mortgage insurers. Among the expected changes will be some aimed at reining in a surge of negatively amortizing loans. Read more

Grocery chains are promising more discounts and price freezes, Ottawa says

Canada’s five largest grocery chains have delivered plans to stabilize food prices to the federal government, Industry Minister François-Philippe Champagne said Thursday.

Champagne met with the heads of Loblaws, Sobeys, Metro, Costco and Walmart in Ottawa last month, telling them that Ottawa wanted to see their plans to stabilize prices by Thanksgiving.

The chains are promising more discounts, price freezes and price-matching campaigns, Champagne said Thursday. 

“These measures will bring a much-needed [and] more competitive marketplace, and the winners of that are obviously Canadians,” he said, adding that Canadians should expect to see grocers start rolling out these plans “within days.”

In August, the price of food purchased from stores increased by 6.9 per cent compared to last year. While that’s still almost twice the overall inflation rate of four per cent, it’s down from a recent high of more than 11 per cent. Read more 

There’s a massive U.S. lawsuit against Amazon for alleged unfair practices

The U.S. Federal Trade Commission (FTC) filed a long-awaited antitrust lawsuit against Amazon on Tuesday, charging the online retailer with harming consumers through higher prices. 

It’s the latest legal move by U.S. authorities aimed at breaking Big Tech’s dominance of the internet.

“The FTC and its state partners say Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation and prevent rivals from fairly competing against Amazon,” the agency said in a statement.

The FTC is asking the court to issue a permanent injunction, ordering Amazon to stop.

Amazon says the FTC lawsuit is wrong-headed and would hurt consumers by leading to higher prices and slower deliveries.

“The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices and faster delivery speeds for Amazon customers, and greater opportunity for the many businesses that sell in Amazon’s store,” said David Zapolsky, Amazon’s general counsel.

The FTC said that Amazon — founded in 1994 by Jeff Bezos and worth more than $1 trillion US — punished sellers that sought to offer prices that were lower than Amazon’s by making it difficult for consumers to find the seller on Amazon’s platform.

Other allegations made against Amazon include:

• Giving preference to its own products in search results over competitors.
• Charging costly monthly and advertising fees to sellers the FTC says have no choice but to rely on Amazon.
• Engaging in “unlawful coercion” to pressure sellers to join Amazon’s Prime fulfilment service.

FTC chair Lina Khan also said that Amazon had used illegal tactics to fend off companies that would have risen to challenge its monopoly. Read more

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What else is going on?

WestJet is suspending flights between Toronto and Montreal until next April
The move follows the company’s takeover of Sunwing and shutdown of Swoop.

Toronto’s pressurized rental market is affecting people’s mental health
We’ve rounded up your stories, and provide tips on how to deal.

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