Households continue to buckle under the weight of their supersized mortgages. That’s the takeaway from the Canadian Bankers Association (CBA) mortgage data for July. The data shows banks have seen the number of mortgages in arrears hit a 12-year high. At the same time, the size of their books is shrinking as banks fail to generate enough originations to match their outflows.
Canadian Mortgage Arrears Rate Rises To Highest Level Since 2014
Residential mortgage arrears at CBA member banks.
Source: CBA; Better Dwelling.
The national mortgage arrears rate climbed 1 basis point (bp) to 0.29% in July, 6 bps higher than last year. The latest jump pushed the rate to its highest level since February 2015, but that month was a bit of an anomaly. May 2014 is the end of the first time it was consistently at this rate or higher. That’s an interesting period, but we’ll circle back to that note after breaking the rest of this data down.
Canadian Banks Hold The Most Mortgages In Arrears Since 2014
The number of mortgages in arrears at Canadian banks.
Source: CBA; Better Dwelling.
The number of mortgages in arrears held by Canada’s banks is still rising. The count rose 1.8% (+249) to 14,270 in July, up 24.9% (+2.84k) from last year. While a 12-year high is something to write home about, it’s how fast it hit that level that presents the biggest concern. Since hitting a record low of 7,274 in August 2022, the volume has climbed 96.2% to July’s number. That’s an extremely rapid climb, though some of the drop was due to policies that allowed banks to delay considering them in arrears.
Canada’s Banks See Total Mortgages Fall To A 6-Year Low
The total number of mortgages at Canadian banks.
Source: CBA; Better Dwelling.
Banks are holding fewer mortgages on their books as originations fail to match outflows. They reported a drop of 0.3% (-12.8k) to 4.91 million in July, falling 0.7% (-35.1k) since last year and 4.0% (-204.2k) lower than the peak. That’s a 6-year low, falling to its weakest level since October 2020—nearly wiping out the entire low rate boom.
Earlier this year, TransUnion warned that mortgage borrowers are tapping credit to help smooth consumption. Mortgage credit’s on the rise, but the number of accounts is down. Rather than paying off debt, households are accumulating more, likely due to the cost of living outpacing wage growth.
Now circling back, most people don’t recall 2014 as a problematic time for real estate. However, that was on the tail end of the condo glut in cities like Toronto and Vancouver. That was shortly after then BoC deputy governor Tiff Macklem warned of a housing bubble. Yes, that Tiff Macklem.
Biggest concern here when looking at those charts is the slope or rate of increase MoM. And my guess is it will steepen going forward.
Canada is headed into a recession of terrifying proportion. While the uber elites of the Liberal party rule with an iron fist.
I take pleasure in the knowledge that Canadians openly voted for the same clown show that got them here.
The banks are playing a game of “let it fall” with the risk of arrears.
Canadian banks are in a very tough spot and it’s going to get worse before it gets better. They’re not generating enough income to offset the rising cost of servicing these mortgages, and the debt is growing. anyone in credit knows where this heading when you borrowers start withdrawing their equity to pay the bills and no one can afford to buy those homes at the current price.
The 96% climb in arrears is pretty alarming when you realize THIS IS THE LOW RATE RELIEF they’re all hoping for.