Canada

Canada’s Non-Bank Lenders See Arrears Rate Rise 11%, Despite Deferral Programs

Canada’s non-bank lenders saw an unusual situation – mortgage growth, and rising arrears. Statistics Canada (Stat Can) data shows non-bank lenders had a big quarter extending mortgages in Q2 2020. The large growth in mortgage extension was accompanied by a sharp uptick in arrears. Highly unusual since those trends tend to require conditions opposite of each other.

Canadian Non-Bank Lenders See Flat Growth For Mortgages

Canada’s non-bank lenders saw very small growth in the second quarter. They had 1,699,229 mortgages in Q2 2020, up just 0.27% from the same quarter last year. The balance of those mortgages was $331.02 billion, up 1.79% over the same period. Not huge growth for a whole year, but the balances did grow a little faster. 

Non-Bank Lenders Had A Big Quarter For Extending Mortgages

The number of mortgages extended in the quarter saw much higher growth. Non-bank lenders extended 193,821 mortgages in Q2 2020, up 16.42% from the same quarter last year. The balance showed similar growth hitting $47.90 billion, up 16.59% over the same period. Yes, this was the same quarter where two of the months saw unusually slow real estate sales due to the pandemic lockdown. Non-bank lenders were still able to squeeze out huge growth of mortgages though.

Canadian Non-Bank Lenders See Mortgages In Arrears Climb 7%

Mortgages in arrears also grew at an unusually high rate earlier this year. Non-bank lenders saw 32,504 mortgages fall into arrears in Q2 2020, up 7.21% from the same quarter last year. The balance of those mortgages was worth $6.21 billion, up 5.35% over the same period. Falling into arrears isn’t quite the same as the bank reported arrears rate. These are any mortgages that are overdue, even if it’s just one day. People are used to seeing the arrears rate for accounts over 90 days. Still large growth, just not as concerning as seeing it in the 90 day arrears category.

Canadian Non-Bank Mortgages In Arrears

The total number of Canadian non-bank mortgages in arrears at the end of Q2.

Source: Statistics Canada, Better Dwelling.

Non-Bank Mortgages Over 90 Days In Arrears Up 20%

Mortgages in arrears over 90 days had a substantial climb from last year. Non-bank lenders reported 4,392 mortgages more than 90 days in arrears in Q2, up 20.13% from the same quarter last year. The balance of those mortgages was worth $1.08 billion, up 31.81% over the same period. The rate works out to 0.26% of non-bank mortgages, similar to the arrears over 90 days at major banks.

Non-bank lenders saw a boom for extending mortgages during the second quarter. The total growth was flat, but the number of accounts extended was substantial. Most interesting is the number of mortgages in arrears over 90 days making such a large climb. Non-bank lenders ran similar deferral programs to banks, that allowed most borrowers to avoid falling into arrears. However, just like banks, they saw the arrears rate climb anyway.

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5 Comments

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  • SH 5 months ago

    I wonder if the government and CMHC will force lenders to extend the deferrals, thereby bailing out overleveraged deadbeat borrowers yet again while renters get zilch (again).

    • Mark 5 months ago

      You do realize mortgage is backed by the home itself as an asset. What do renters have as collateral asset?

      • Double Take 5 months ago

        Still doesn’t negate the fact that the home owner is getting a bailout from the govt in the event they loose their job and can’t pay. Heck, they were offered deferrals even if they did not need it. Renters have not been provided anything similar to this.

      • SH 4 months ago

        Mark, my issue is that the government and CMHC forced the banks to offer these deferrals. If banks decided, of their own volition, to grant deferrals and without government pressure, it’s no problem. That would be a private issue between lender and borrower.

        How is it justified for the government to intervene to give mortgage borrowers a massive 6-month holiday from their financial obligations without giving the same to renters? You do realize that many many landlords received deferrals while still collecting rent? Are Canadian renters taxpaying citizens too, or are they not?

  • V 5 months ago

    Renters should have saved money and bought a house.
    Then they could get bailed out too!

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