RBC Financial Strategy and Performance

Structural backdrop to the Canadian housing market Regulation " Canada (1) Government influences mortgage underwriting policies primarily through control of insurance eligibility rules - Fully insured if loan-to-value (LTV) is over 80% Must meet 5-year fixed rate mortgage standards Government-backed, on homes under $1MM Down-payment over 20% on non-owner occupied properties CMHC last increased mortgage loan insurance premiums in 2017 by ~15% for new mortgages with LTV over 90% Minimum down payment for new government-back insured mortgages is 10% for portion of the value of a home being purchased that is between $500,000 - $999,000, and 5% below $500,000 Re-financing cap of 80% on non-insured ☐ ☐ U.S.(1) RBC Agency insured only if conforming and LTV under 80% No regulatory LTV limit - can be over 100% Not government-backed if private insurer defaults Consumer Mortgage interest not tax deductible Behaviour ■ Greater incentive to pay off mortgage ☐ Mortgage interest is tax deductible ■ Less incentive to pay down mortgage ☐ Strong underwriting discipline; extensive documentation ☐ Lender Behaviour ☐ Most mortgages are held on balance sheet ■ ■ Conservative lending policies have historically led to low delinquency rates Wide range of underwriting and documentation requirements Most mortgages securitized ■ Lenders' Recourse Ability to foreclose on non-performing mortgages, with no stay periods ■ Stay period from 90 days to one year to foreclose on non-performing mortgages Canadian Housing Market Full recourse against borrowers (2) ☐ Limited recourse against borrowers in key states 28 (1) Current regulation and lenders recourse. (2) Alberta and Saskatchewan have some limited restrictions on full recourse.

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