Canada is pulling all of the measures to make sure households and businesses don’t go bust, but it’s just time for some. Office of the Superintendent of Bankruptcy (OSB) data shows insolvencies increased in Q3 from the previous quarter. The quarterly increase is somewhat surprising, considering the number of lender support programs.
Canadian Insolvencies Rise 7.9% In Q3
Insolvencies are climbing as lockdowns ease, although they haven’t gone above last year’s levels. There were 35,535 insolvencies filed in Q3 2020, up 7.9% compared to the previous quarter. This also works out to a decline of 40%, when compared to the same quarter last year. Not as high as last year, but they’re rising even amongst a more lender friendly environment.
Canadian Quarterly Insolvency Growth
The percent change of insolvency filings in Q3 2020, compared to Q2 2020.Source: OSB, Better Dwelling.
Consumer Insolvencies Rise 8.1% In Q3
Breaking this down, the vast majority of the fillings made were consumer insolvencies. There were 34,708 in Q3 2020, up 8.1% from the previous quarter. This works out to a decline of 40.3%, when compared to the same quarter last year. Clearly most of the quarterly increase is in this area.
Canadian Q3 Insolvency Growth
The percent change of insolvency filings in Q3 2020, compared to Q3 2019.Source: OSB, Better Dwelling.
Canadian Business Insolvencies Rise 3.5% In Q3
Businesses represent the remainder of the insolvency filings. There were 827 filings made in Q3 2020, up 3.5% from last year. This works out to a decline of 24.1%, when compared to the same quarter last year. As you might have assumed from consumer numbers, this demographic is underrepresented in the total.
The numbers in this context don’t quite tell the full insolvency story. Due to unprecedented supports, experts from Deloitte have said they believe “failures will materialize as time passes.” Year-over-year data doesn’t tell us much, because few lenders were in a rush to collect last year. However, there’s been a quarter over quarter uptick, despite more supports and measures in Q3 vs the previous quarter. This means we’re seeing an uptick, even as the government fights fillings. As these measures ease, we should see even more insolvencies, which were at multi-year highs before the pandemic.
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The deferral is actually better for the lender than the consumer. An insolvency means the consumer will only pay a fraction of their debts. If the lender delays the rules, they’ll be able to capture more money.
People are convinced insolvencies are the issue, but they’re confused about who. Inefficient debt means higher servicing costs paid, and lower contribution to economic growth.
It would be one thing if it was interest free. If you’re in year 4 of your first five years of a 25 year amortization less than one third of that payment was principal. Taking six month off paying and just accruing interest sets you back almost two years.
It certainly benefited borrowers who put the deferred payements in the stock market. Big gains courtesy of the gouvernement and CMHC which FORCED the banks to grant deferrals to overleveraged deadbeats, no questions asked. Did renters get a rent deferral mandated by the government to put the cash into financial markets for a quick gain ? Of course not. They got zilch while deadbeat mortgage borrowers feasted. A despicable unfairness.
SH – give it a rest. renters were given freedom from evictions
It’s not at all the same thing. Only a tiny number of renters would’ve been at risk from eviction anyway. A regular renter who still had a job and not in financial distress, and who therefore kept paying the rent, got no benefit whatsoever (so-called “professional renters” aside, and those are small in number). The difference with the mortgage deferrals is that everyone with a mortgage could take advantage of it without consequences, not even a hit to their credit score. A renter who refused to pay rent will undoutedly face consequences and will eventually be evicted – I’m sure many already have been since the initial lockdown ended. All I’m saying is that if the government gifts mortgagees a 6-month payment holiday, consequence-free, renters should have received an equivalent rent holiday. Terms of repayment of the back rent could be arranged between landlord and tenant, subject to certain guidelines.
To be clear, I am opposed to granting payment holidays to either mortgagees OR renters. But if the government intervenes on behalf of one, it is only fair they extend the same or similar benefit to the other.
The TO housing market scares me a little. I want to attempt a “value investing” purchase on a condo in a low traffic area but also close to a University. My daughter/nephews will be attending Uni soon and might end up in the city.
Do I wait until March or April and keep an eye on the market to see a drop? And can I negotiate condo fees? I’m not sure why Condo Corps don’t make these fees contingent on actual work for existing year. It feels (and is) such a cash grab that it totally puts me off attempting this market
The government needs to punish real estate speculators. Its conditions like these that force revolution upon societies.
non-negotiable, best you can hope for is to get onto the condo board council to help make decisions about how the money is spent.
Main housing problem is that we don’t have land to build. What??
Canada is about 13,883 times bigger than Singapore.Singapore is approximately 719 sq km, while Canada is approximately 9,984,670 sq km, making Canada 1,388,202% larger than Singapore.
OH wait I totally forgot that banksters hate the idea of people owning houses. They like to own people instead through lifetime modern debt slavery systems.
I agree in principle. However, a major area of Canada is unable to be settled… Or people are unwilling to settle – Me included. Also, there is a reason most (80-90%) of population is located near the border, which is probably the same reason you are (80% chance). Included in this there is a lot of area which is Native land only. Please save the argument on what is indigenous land because that’s not what I commented for and I am not an expert on this.
In saying this, we have so much land even in Southwestern Ontario that there’s not shortage. We must decide however what purpose this land shall be for.
Don’t blame the banks. They aren’t the decision-makers. They’re just playing the game crafted by governments and apparently perfected by the current federal Liberal government which puts the interests of middle-class Canadians last.
Yes. The mandate is to keep Canada “open for business”.. own houses at low rates, buy new cars and owe money on CCs. With real estate, you can’t tell me that analysts didn’t know the fallout from allowing a 5% down policy?
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