Canadian mortgage debt has seen explosive growth return, but banks aren’t seeing the benefit. Canadian Bankers Association (CBA) data shows the arrears rate in April was the highest for the month in 12 years. Mortgages in arrears—at least 90 days past due—have nearly doubled to the highest level in over 12 years. Meanwhile, their mortgage count has fallen so sharply it erased the entire boom sparked by 2020 rate cuts.
Canadian Mortgage Arrears Rate Hits A 9 Year High
Canadian bank mortgages at least 90 days past due, as a share of total mortgages.
Source: CBA; Better Dwelling.
The arrears rate at Canadian banks came in at 0.28% in April, less than a basis point (bp) higher in the month and 6 bps higher than last year. After doubling since September 2022, the rate now sits at a 9-year high. The rate has moved less than a basis point over the past 3 months, but that doesn’t mean stability. The rising volume of mortgages in arrears makes that clear.
Canadian Bank Mortgages In Arrears Hits A 12 Year High
Canadian bank mortgages at least 90 days past due.
Source: CBA; Better Dwelling.
The count of mortgages in arrears climbed 0.23% to 13,752 in April, up 26.0% (+2.8k) from last year. The sharp rise is part of a much bigger trend, with volume up 89.1% (+6.5k) from the cycle lows hit in August 2022. Canadian banks haven’t held this many mortgages in arrears since March 2014.
Casual observers may see the 2022-low and attribute the sudden rise to interest rates. Since these mortgages are at least 90 days past due, loans in August 2022 would have fallen behind starting in May 2022. When the problem began to surface, the overnight rate was only 1.0%—roughly 43% lower than the start of 2020. The sudden reversal is less about the cost of interest than the scale of debt, which amplified sensitivity to rate hikes.
Canadian Banks Have Seen The Entire 2020s Low Rate Boom Reverse
Canadian mortgages held by banks.
Source: CBA; Better Dwelling.
Mortgage debt is rising aggressively in dollar amounts, but banks are seeing their count fall. Mortgages held by banks fell 0.1% (-4.31k) to 4.93 million in April, down 0.9% (-44.8k) from last year and 3.7% (-189.7k) from peak. April marked the seventh consecutive month lower, with the volume back to its weakest level since October 2020—when the low-rate boom first took off. The mortgage count at banks has wiped out nearly 6 years of growth, rolling back the entire real estate boom.
Falling mortgage counts mean each arrears file hits harder. Facing a shrinking book, the rationale behind the scramble for questionable loans is clearer. Less clear is how that plays out now that Canada’s banking watchdog quietly threatened them with violations of the Bank Act ahead of 2027. The heavily redacted minutes didn’t make it clear what’s happening in 2027, but it’s probably nothing.
