Canada

Canadian Mortgage Debt Is Soaring, But Payments Fall Over $4 Billion

Whether Canadian real estate owners needed it or not, a lot took a break from paying their mortgages. Statistics Canada (Stat Can) data shows mortgage payments fell in Q2 2020, as many took deferrals. While lenders collected a lot less in payments, almost all of it was principal payments. Payments towards interest continued to rise, even as total payments fell.

Canadian Mortgage Payments Fell by $4.49 Billion

The amount Canadians paid towards mortgages in the last quarter made a very sharp decline. Total payments add up to $90.27 billion in Q2 2020, down 4.74% from the previous quarter. This is about $4.49 billion less than the previous quarter. Compared to the same quarter last year, this is 3.32% lower. The quarter-over-quarter drop was so large, it actually eliminated all of the gains. Breaking these numbers down, we can see how mortgage payment deferrals helped to swell the total outstanding mortgage debt. 

Canadian Mortgage Payments

A breakdown of the quarterly amount Canadians paid towards mortgages, divided into obligated principal, and interest.

Source: Regulatory Filings, Better Dwelling.

Canadian Mortgage Principal Payments Fall Over $5 Billion

Obligated principal payments, the minimum amount towards mortgage principal, made a sharp decline. Obligated principal payments fell to $35.92 billion in Q2 2020, down 13.02% from the previous quarter. This is a $5.38 billion decline from the previous quarter. Compared to the same quarter last year this works out to a 9.00% decline. People aren’t just paying down less on their mortgage from the previous quarter. They’re paying down a lot less than they were last year. 

Canadian Mortgage Payment Change

The quarterly percent change in the amount of principal and interest paid on Canadian mortgages.

Source: Regulatory Filings, Better Dwelling.

Mortgage Interest Paid By Canadians Increased

The amount of interest paid did go the other way though, with lenders collecting nearly a record amount. The total interest paid reached $54.30 billion in Q2 2020, up 1.67% from the previous quarter. This works out to an increase of about $892 million over that period. Compared to the same quarter last year, it’s up just 0.85%. While that seems small, any increase is huge compared to such substantial declines in payments. 

Canadians are making significantly smaller payments on their mortgages, despite rising balances. This is largely due to payment deferrals, which have also been a contributor to the balance increases. Meanwhile, mortgage lenders are collecting a near record of interest from payments, despite low rates.

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11 Comments

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  • Jason Chau 4 weeks ago

    Good insight here. The deferrals talk always focuses on the average payment, not the amount deferred borrowers were paying. People with smaller mortgages were less likely to have missed their payment.

    That means we’re looking at a concentration in high density cities, with larger mortgages. They keep estimating $1 billion based on average payments, but this is almost 4x that value missing.

    • LT 4 weeks ago

      Which explains the savings rate too. Savings rate was largely just delayed mortgage payments that turn into a fixed payments for the term remainder.

  • Fight Back 4 weeks ago

    Bring down housing costs, anyone with multiple residential properties should not receive any assistance. For hoarders and speculators to sell.

    • JB 3 weeks ago

      Why should someone with multiple residential properties not receive assistance? There are many people who own 1-2 small rental properties where tenants could not/would not pay rent. The owners still have to pay expenses to maintain these properties of which one is a mortgage and they count on the monthly rents to pay these expenses.

  • fred 3 weeks ago

    Q; How long will it takes for average family with $83000 income if they save %10 of their income each year to save a $200,000 deposit for %20 down and 40000 land transfer fee to purchase a house in Toronto?

    • AM 3 weeks ago

      The family will have about $62,000 in income after taxes. If they pay $1300/month to rent a two bedroom apartment in Toronto, they will have $46,000 left over each year. After all other expenses, if they are extremely frugal, they might be able to save $20,000 each year towards a down payment. If they get a 1.5% rate of return on their savings, in 9.5 years they will have $200,000.

      But if the house appreciates at 4% per year, in 10 years the 20% down payment will be $296,000, which they cannot yet afford.

      After 17 years of savings, they will finally be able to make a 20% down payment of $390,000.

      If they want to buy a house with 20% down in less than 17 years, they will need to increase their savings, obtain higher return on their investment, or hope the house appreciates at less than 4% per year.

      • AM 3 weeks ago

        If they only save 10% of their income, the result is more grim.

    • Fight Back 3 weeks ago

      A: The government dont care, because they are in bed with real estate industry to bleed young families dry.

      Young people have the right to be angery and its time to fight back.

  • Ghl 3 weeks ago

    Time to tax all existing foreign ownership of real estate in Toronto and Vancouver. We all know what the solution is, the government wont implement it because its corrupt. It continues to force tax payers to pay for real estate speculator gains.

    • Neo 3 weeks ago

      Won’t do a damn thing. It’s a made in Canada problem more than the foreign boogieman. Particularly since COVID.

      Canadians are drunk off real estate an people buying now have never lived through a correction nor do they think one will ever take place.

      • Erik 3 weeks ago

        True story…. It’s a known fact that real estate prices never ever go down… Especially during or after a world recession or depression…

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