Canada

Canada’s Big Six Banks Report Over 500,000 Mortgages On Payment Deferral

Canadian banks are starting to see mortgage payment deferrals expire, and households resume payments. Canada’s Big Six banks reported Q3 earnings last week, which ended on July 31, 2020. Mortgages on payment deferrals have dropped by nearly a fifth in the latest quarter. While that doesn’t tell us how many people actually needed the deferral, it does bring the market closer to finding how many do.

Canadians Have Over 510,000 Mortgages On Payment Deferral At The Big Six

Canada’s Big Six are seeing deferrals expire, and people resume payment on tens of thousands of mortgages. There were 510,530 mortgages on payment deferral at the Big Six at the end of Q3, down 17.53% from the previous quarter. The mortgages are worth $136.27 billion, down 15.38% from Q2. How this number drops is important to understand, since not everyone took a deferral because they needed it.

Only One Bank Saw The Number Of Mortgages On Deferral Increase

In terms of account numbers, all but one bank is seeing fewer mortgage deferrals. RBC has the most with 138,830 mortgages on payment deferrals in Q3, down 30.18% from the previous quarter. TD holds the second most at 107,000 mortgages deferred, down 15.08% from the previous quarter. Scotiabank is the only bank to see an increase to 99,000 mortgages deferred in Q3, up 5.32% from the previous quarter. RBC having the most mortgages on payment deferrals isn’t particularly noteworthy for the largest bank. Scotiabank seeing an increase while everyone else is seeing declines is a little odd.

Canadian Mortgage Deferrals At Major Banks

The number of mortgage accounts on payment deferrals at Canada’s Big Six banks.

Source: Bank filings, Better Dwelling.

The Mortgages On Payment Deferral Are Worth $136.27 billion

The value of the mortgages on payment deferral at the Big Six is falling as well. Royal Bank had the most adding up to $41.27 billion in Q3, but was down 23.66% from the previous quarter. CIBC has the second most with $33.30 billion on deferral, down 6.20% from the previous quarter. Bank of Montreal is the only one to see an increase to $17.25 billion on deferral, up 0.52% from the previous quarter. The increase is relatively minor, but considering BMO is seeing fewer accounts on deferral – this means bigger mortgages were asking for relief.

Value of Canadian Mortgage Deferrals At Major Banks

The value of mortgage accounts on payment deferrals at Canada’s Big Six banks.

Source: Bank filings, Better Dwelling.

The declines in mortgages on payment deferrals is expected, and doesn’t quite tell us as much as people likely hope. Deferrals were granted to a number of households that didn’t actually need them. They were also granted for varying lengths, from one to six months. As these deferrals expire, a more clear picture of how many households are distressed will actually emerge.

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11 Comments

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  • Ethan Wu 3 weeks ago

    The industry numbers that government has been reporting was how many people have gotten one, not how many people are on one. This is the first breakdown I’ve seen, so thank you.

    16% seemed too high. This is more like 10% of books.

    • Yusef 3 weeks ago

      Real forecasted arrears rate is more like 5%. Keep in mind arrears are accumulative, so a higher rate for a few months keeps going.

    • Neo 3 weeks ago

      This is the number from Q3 which means the number for Q2 was higher. We are past the peak. The peak was 16% of households. The fact that it is still this high is a bad sign. It only took 8% of U.S. households in trouble to cause a housing crash down there.

  • straw waler 3 weeks ago

    Why are mortgage deferral down for the big banks… because they’re being wrapped into a mortgage bond and eventually sold to the BOC..
    Mortgage bonds are a mixture of deferral mortgages that have a high risk of becoming non-performing and the odd low risk mortgage

    • Trish 3 weeks ago

      It’s my understanding they’re down because some banks only offered 3 months, and some people didn’t even need the deferral.

      I’m fact, some banks offered them voluntarily apparently.

      • The Truth Will Set You Free 3 weeks ago

        Straw Waler is correct. The reason the number declined is because a significant amount of high risk mortgages which had deferrals have been removed from the big 6 banks and handed over to the Bank of Canada through a program implemented by the BoC to free up capital so that the banks would continue to lend out BUT as history will teach us this hardly will happen as banks are all about protecting their bottom lines. Most likely come the New Year people will see the banks start pushing lending rates up. You can already see the shift from the banks. If you want to get a mortgage and have 20% to put down they will not give you these 1.68% 5 year mortgages that are being promoted. Instead you will be forced to accept a 2.4% term and this is due to the risk. Putting 20% down means that banks own your mortgage so if say there is a 40% correction as was predicted by the BoC then the banks lose out. This is why they want less than the 20% down so that they’re protected by the CMHC when the market tanks. I’d do the same if I was the bank but it just shows you that the banks know what’s coming even if they are promoting an entirely different narrative.

  • straw walker 3 weeks ago

    The schedulle “1” banks when classifying the amount of deferral mortgages use it as a % of assets.
    If they determined these mortgages as a % of regulatory cash, the deferrals would be 100% not 16%.
    The value of assets has been known to fluctuate.

  • The Truth Will Set You Free 3 weeks ago

    The numbers they’re publishing are manipulated to be better than what the real data is. Fact is the banks all know home prices are teetering which is why they are pushing borrowers to put less than 20% down so that they (the banks) will be protected through the CMHC when the home prices plummet. If you put less than 20% down you can lock in at under 1.7% for 5 year fixed but if you put 20% or more the best the banks will give you is a rate almost .75 basis points more.

    • Christopher 3 weeks ago

      That doesn’t make any sense. Source?

      • questionguy 3 weeks ago

        I can confirm the rate differential aspect – no CMHC means no ultra low rate.

        But, no CMHC on property over $1mm, so those rates wont be for SFDs in Toronto

  • Philip Walters 3 weeks ago

    I would think if people could defer the principal and the interest only would help a lot. The banks would be getting their money people with quickly reduce their payments. I see it as a win-win

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