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Canada would be better off if pesky variable-rate mortgages with fixed payments were "less prevalent," says our banking regulator.

Oftentimes, when rates surge, their "fixed payments do not cover the interest payments and mortgage principal outstanding grows," said Superintendent Peter Routledge in a keynote speech at Thursday's Scotiabank Financials Summit.

"In fact, the contractual amortization period does not change. And mortgagors will have to make up the deferred principal paydowns when they renew. This means they are at risk of suffering a significant payment shock."

The Bank of Canada, widely known for its plot-twist-worthy decisions, went for the predictable ending this round. It left its key policy rate at a 22-year high of 5.00% - just as the bond market expected.

Compared to a 25 bps hike, today's rate pause saved an average floating-rate borrower from seeing up to a $70 increase in their monthly payment. (The average Canadian mortgage amount is $351,692, according to the latest TransUnion data.) 

WealthOne Bank of Canada is one of the most competitive near-prime lenders. So, it was concerning to hear that it's under Finance Minister Chrystia Freeland's microscope.

Her scrutiny of the company was reported by the Globe this weekend. In a nutshell, the DoF made the company jump through all sorts of hoops due to alleged concerns about national security and potential money laundering. Among other things, Freeland's office forced the bank to cut ties with three key investors with apparent links to the Chinese government.

This begs the question, is any of this relevant to mortgage borrowers and brokers?

We spoke today with WealthOne President & CEO Paul Leonard to learn more. Here's what he told us.

It's always interesting to check in with mortgage fintechs like Pine. After all, if investors like Greylock Partners, Inovia Capital and Intact Ventures value the company at $75 million and hand them $30 million, they must be doing something unique.

On Sept. 11, Pine unfurls itself nationally across Canada—everywhere but Quebec (possibly because of the nightmarish red-tape, language rules and compliance environment in the province).

The company sells an ultra-low rate and targets a younger demographic with its simple, fast process. Two out of three customers breeze through its whole application on their smartphones, the company says.

I recently spoke with Co-founder Justin Herlick, who just came off his best month ever since opening the doors in January 2022. My goal: Peek under the hood and see what's making the Pine tree grow.

We dug up four notable takeaways:

Canada's economy needs stormy weather before the sun can shine. And on Friday, we got some dark clouds.

Our economy shrunk, and joblessness surged below the border. For all anyone knows, Canada may already be in the midst of a technical recession (defined as two consecutive quarters of negative growth).

For low-rate enthusiasts, it was a glimmer of hope that the top in rates might be in. Canada's 4-year swap rate dove another 7 bps, per the chart above. And—while it's not unheard of that some banks would hike fixed rates in the next week or so—sliding swap rates make that less likely.

Following the data, the economic establishment hurried to declare that rates had hit their ceiling. But long-time readers will recall us reporting that same market sentiment last spring, and we all know how that turned out.

Here's more of the macro nitty gritty, and what to expect next...