Canadian Mortgage Arrears Hit Highest Level Since 2017, Even With Pandemic Measures

Canadian banks are seeing a higher rate of arrears on mortgages, despite support. Recently released Canadian Banks Association (CBA) data shows the mortgage arrears rate jumped in May. The rise in arrears implies non-payment issues were brewing before the pandemic. It also means the bank’s special treatment of mortgages hasn’t totally eliminated risk.

About Canada’s Arrears Rate During The Pandemic

Quick overview of the residential arrears rate published by the CBA. The CBA’s rate includes ten member banks that represent a big chunk of mortgage lending. It’s not a comprehensive look, but it captures the majority of consumers. Smaller lenders, and private lenders, are excluded. Also, for a mortgage to be in “arrears,” it needs to see at least 3 months of non-payment. This means if a mortgage is in arrears in May, the borrower stopped paying in February.

The length of time people need to stop paying is going to be an important one when looking at the latest numbers. The latest data point is May, so a sudden rise means a hiccup in payments in February at the latest – before the pandemic. Further, pandemic supports allowed banks to avoid an arrears classification on many mortgages. As a result, the rates reported are lower than they should be, and downplay the issue. Got it? Let’s look at the numbers.

Canadian Residential Arrears Rise 12%, Even With Payment  

The CBA’s national arrears rate shows a steady increase, even during the pandemic. The rate hit 0.26% in May,  up 12.63% from the same month last year. This is the highest level since April 2017, and back then the rate was falling – not rising. Both the level of arrears and growth are unusually high for a normal period. It’s a little odd during a period of unprecedented government support designed to stop this rate from rising.

Canadian Mortgage Arrears Rate

The Canadian mortgage arrears rates at the ten largest CBA member banks.

Source: CBA, Better Dwelling.

Overall, the rate remains relatively low, however the sharp increase combined with government supports, make it unusual. The growth rate acceleration only has two periods of similarly large moves – before the 90s downturn, and the Great Recession. The data could be a large contributor to why banks have been saying they expect rising arrears rates, while the public laughs at the thought.

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  • WF 3 years ago

    The pandemic is extremely weird, and really messes with our perception. I watch the news, and see high unemployment and shuttered stores.

    My life is barely changed. I just work at home, and still consume at pretty much the same pace, less traveling far for vacation. It’s going to be a shock for people what things look like, when the issues start to brew in their own circle.

    • SH 3 years ago

      How are you possibly able to consume at the same rate as pre-pandemic? Lots of amazon purchases?

      I’m lucky to be able to work from home too. But my consumption has plummeted. 95% of meals are cooked at home (I already mostly did that before, since I like to cook, but not 95%!). Transportation costs are close to nil. Ordered a bunch of books to help pass the lockdown hours, but that’s about it.

  • Michael 3 years ago

    While an increase in arrears is never a good thing but we went from 0.23 to 0.26. Hardly a huge jump and could be due to the issues in Alberta unrelated to covid.

  • Opo 3 years ago

    We need to force people with multiple residential properties to sell their hoard.

    • AngryGroot 3 years ago

      Absolutely. 100%. Or tax the crap out of the 3rd property and up. Let the hoarders pay for the pandemic costs since they raided and benefited the most from it.

  • Bob Walter 3 years ago

    These stats are from January 2020? The pandamic is not registering there yet.
    If I recall they were still busy back then re-patriating infected people all over the world from hot infection zones. Even April / May might not be that interesting because people went onto mass debt deferral and there was no need to pay mortgage for 6 months.

    March 2021 is when the stats would get truly interesting.

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