Canadian mortgage borrowers are experiencing a hiccup when it comes to payments. Equifax Canada data shows mortgage delinquencies climbed further in Q`1 2024. While the delinquency rate remains relatively low from a historical standpoint, the sharp climb made over the past few quarters may show it can change soon.
Canadian Mortgage Delinquencies Are On The Rise, But Still Remain Low
The delinquency rate for residential mortgages across Canada, as reported to Equifax.
Source: Equifax; CMHC; Better Dwelling.
Canadian mortgage delinquencies remain relatively low, but they are climbing at a fast rate. The delinquency rate advanced 0.01 points to 0.18% in Q1 2024, and is now 0.03 points higher than last year. Nowhere near pre-2020 levels, but steadily advancing back towards those levels.
Canadian Mortgage Delinquencies Might Just Be Getting Started
Delinquencies tend to be a backwards looking trend since they take so long to be reported. The rate isn’t very high from a historical perspective, only hitting 2021-levels. However, there’s two things worth keeping in mind—the volume and change.
Rates are a share of a total. While the delinquency rate remains half as much as the recent peak seen back in 2016, mortgage debt has doubled over that period. That may indicate the volume of mortgage delinquencies are similar in absolute numbers at half the rate. Small share of losses for lenders but still quite a few delinquencies for a period where the economy is doing well. It’s unusual for Canada to see both rising mortgage delinquencies and the IMF forecast its economic growth will outpace other G7 peers.
Even more disturbing is the fact they’re rising while lenders have been granted new tools to ensure borrowers can mitigate pressure.
Lastly, the most important part—the problem is most likely concentrated in more expensive regions where sales are declining. In Toronto the delinquency rate climbed aggressively to a new 8-year high. It also likely represents a significant share of total mortgages, skewing the numbers. However, other regions like Vancouver are also seeing the rate climb, and both cities mentioned tend to lead market trends.
If it’s your primary residence, never borrow more than you can afford and you’ll be fine as long as you don’t need to suddenly sell.
Investors are in another situation, but speculators win a lot. They need to lose sometimes too, and we the taxpayer should not be bailing out those who “risked” for reward but think the gov should now make them whole.
The problem with your take is the government told us rates would be low and then changed their mind. If Freeland & Macklem walked us into a trap, it’s only fair that they mitigate some of the problems.
It wasn’t a promise though. So buyer beware.
Rates were at zero for 2 years and under 1% for 2.5 years. If you didn’t take that opportunity to lock in a fixed rate and instead chose to gamble on perpetual variable with interest rates at 5000-year lows, that’s on you. Pull up your bootstraps and pay your own bills. The government does not you a return on your speculative bet.
Government does not OWE you a return on your speculative bet, I meant to say
MOAR! It’s BS that the reward for doing the right thing and exercising basic risk management is having your paycheque turned into a cheque redistributed to the people who exercised no restraint whatsoever.
That’s Canada as a whole. Get a government job and apply for tenders at a private company, and do a billion in sales since your primary job involves half the work of a gov job just 10 years ago.
Simply put they don’t want you to work for anyone but them. You exist to pay to create assets for wealthy asset owners. Enjoy your trinkets like a home that makes you feel as rich as the other 70% of homeowners.
All signs point to it inching higher in Q2 already. Not sure about Q3, but in Toronto at least people are starting to realize this may not be nearly as temporary as an issue as they had believed.
OSFI delaying BASEL III guidelines is market intervention to save investor mortgages, which would have seen costs rise under the new risk guidelines. That means they saw a problem worthy enough of stepping in, and that’s going to be interesting if the general market ever spots that issue.
The cautious never got wet and stayed on dry land. Only the foam partiers are left floating out at sea with no one to rescue them. Only waiting for the tides to being their naked bums back to shore.
To better days in 10 years if we’re lucky.