Canadian households are asking banks if they can skip a few payments, and banks are (mostly) saying yes. Canadian Bankers Association (CBA) data shows hundreds of thousands of payments are being deferred. The number, as big as it is, represents select member banks – meaning there’s many more deferrals. Even just using this data, it works out to billions of payments skipped over the next few months. This is going to cost consumers hundreds of millions in extra interest.
Canadians Deferred Over 720,000 Mortgages
The CBA has found households are asking for a lot of relief from payments – and banks are mostly giving it to them. There were over 720,000 mortgages deferred at just 13 CBA member banks by April 29. This represents 14% of mortgages. Credit cards have so far seen 417,000 applications – at just the Big Six, Laurentian Bank, and HSBC. Remember, these numbers don’t include all member banks such as American Express. The numbers also don’t include non-bank lenders, and credit unions. In short, there’s a lot more deferrals that aren’t being counted so far.
Mortgage Deferrals Work Out To Over $950 Million Per Month
Those mortgage deferrals might add up to billions if people take the banks up on the full six months. The 720,000 mortgages deferred as of April 29th, was an increase of 44% from the beginning of the month. Using the average mortgage payment in Q4 2019, this works out to $958.12 million per month. If the number deferred averages out at the same level for a six month period, it works out to $5.75 billion. At just 13 CBA members. Note that’s using the average payment, which the CBA also used in its press conference. Logically speaking, households with smaller payments are less likely to tap a deferral.
Canadians Also Asked For Over 417,000 Credit Card Deferrals
Credit card deferrals seem tiny in comparison, but work out to a lot of interest accumulating. Over 417,000 requests have been made by April 29, at just eight lenders. Using the average minimum payment, this works out to $32.16 million in potential deferrals. Over six months, that would work out to $192.96 million in deferred minimum payments. More interesting is if each of these cards deferred had the average balance and interest at 18% APR, users would have racked up a combined $109.37 million in interest on the balance. Great haul for a bank, assuming people can pay it off. Not so great for deferred users.
Canadian households deferring hundreds of thousands of payments will send mixed indicators. It frees up finances for households, so they can continue to consume. However, since people aren’t paying down debt, interest will rise, and eat at future earnings. Consumer and mortgage credit growth will also be easily boosted without payments. Credit growth is typically considered a sign of consumer confidence. However, this time it’s a sign that many consumers aren’t able to pay their bills. Banks are being generous by deferring payments, but they can only let so many liabilities rack up.
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That’s all folks!
Toronto’s real estate industry is trying to spin Sidewalk Labs cancellation due to development hurdles, but they flat out say the impact to “Toronto real estate.”
https://www.theglobeandmail.com/business/technology/article-google-affiliate-sidewalk-labs-abandons-toronto-smart-city-project/
Most likely they’ll move to a city with more stable valuations, since the optics of building a smart city where prices fall reflects bad on them. The whole team at Google is still intact.
Not a good sign
CDNs just have taken on too much debt.
Maybe this down turn will give the economy a time to reset..
Really can prices of houses and vehicles continue on this upward trend??
Will society and it’s views change?? A society that to this point is totally consumer and debt driven.
The pendulum will swing back to a more conservative lifestyle.
A not well published fact is that the lenders are all charging a $850 deferral fee to process the deferrals. If there is a way for lenders to charge a fee that goes directly to their bottom line they will. In my opinion it’s bad enough that they would charge a fee for something that clients need to get by during hard times but an exorbitant amount like this makes it even worse. It’s hard to justify under any conditions. The minute one of them charges a fee the rest all jump on the fee bandwagon.
I’m not against companies making a profit ( I own and like bank stocks) but this is an abusive and opportunistic cash grab.
I wonder at this point would the banks and government just tolerate the 1% that they are never going to get their money back from? The damage of not collecting the 1% means they can keep on stiffing 99% with high and higher prices.
For their profit, banks seem to get their money from the “top” now anyway with free money being printed from the BOC so Banks would just be trying to push as many dollars debt down to Joe the Laborer.
Not in their interest to collect and repossess which causes mass panic. Better to take the loss on 1% and keep stiffing 99%? China might pick up the slack anyway.
In the USA, the stock market is too big to fail. In Canada, the housing market is too big to fail.
In my opinion it’s wreckless of the government to be tossing unlimited sums of tax payer money to backstop people who spent too much on housing and a mortgage they can’t afford.
I bet the Federal government is sweating bullets and waiting for the day they can open the borders so flood’s of foreign dirty money can rush back in and re-inflate this train wreck.
Why should any bank worry when all losses can be billed to taxpayers.
What do we even need banks for