Corporation assures shareholders that they are protected from the worst effects
Amid the Bank of Canada’s sustained rate hikes, Firm Capital Mortgage Investment Corporation announced that as much as 95% of its mortgages are at floating rates designed to adequately respond to rising interest rates.
“The corporation has, for years, protected shareholders in the event of rising interest rates by requiring the vast majority of mortgage investments to be floating at the greater of (i) Bank Prime Rate plus a spread and, (ii) a Fixed Floor Rate. Therefore, as Prime rises, so does the overall interest rate charged to borrowers,” Firm Capital said.
“The Floating Rate Investment Feature has been a long-term operating strategy of the corporation as a specialist in bridge financing,” it added.
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As of the end of 2021, the weighted average face interest rate of Firm Capital’s mortgage investment portfolio was at 7.91%. This rose to 8.05% as of March 31, 2022, which the corporation said correlated to a 25-basis point increase in Prime that occurred during that month (Prime stood at 2.7%).
“With the preservation of shareholder’s capital at the forefront of our investment strategy, any opportunity cost lost looking for the right investment in an uncertain market has been offset by the rise in bank prime,” Firm Capital said.
