Canadian Mortgages Over 120 Days Past Due Rises At The Fastest Pace In Years

Canadian mortgage delinquencies are falling, except for people really behind. Canada Mortgage and Housing Corporation (CMHC) data shows the change of mortgages past due in Q3 2020. Most segments of days past due (DPD) show a sharp decline in the most recent reported quarter. This was largely expected due to payment deferral programs. One segment that bucked the trend, regardless of programs, was severe delinquencies. Instead of falling, this segment is actually showing accelerated growth.

Mortgage Delinquencies & Days Past Due

Mortgages are overdue if payments haven’t been made by the due date, but it’s not always a problem. Sometimes people forget for whatever reason (e.g. switched bank accounts, etc.). It’s not even statistically significant, because the majority catch up soon after. It’s when bills aren’t paid after the lender makes multiple contacts, that it becomes an issue. After attempts to contact the borrower fail, the borrower is most likely having trouble paying. 

Like with almost all credit, the longer the bill is overdue, the more likely the borrower will default. Once they reach over 60 days past due (DPD), they appear as a red flag. After 90 DPD, the borrower shows up in arrears statistics. Once they reach over 120 DPD, odds sharply increase on them not being able to catch up on the overdue bills. Before 90 days shows future flows. The more DPD, the more problematic near term. 

Early Delinquencies On Canadian Mortgages Are Down Sharply 

The number of mortgages in early delinquency is down sharply from last year. Mortgages 60 DPD, but less than 90 days, are down 5.19 basis points (bps) in Q3, compared to last year. There was a big uptick in Q2 compared to the past few years. However, that’s mostly an anomaly, with it generally trending lower.

Canadian Mortgage Delinquencies By DPD

The basis point change in the number of delinquent mortgages, grouped by days past due (DPD).
Source: CMHC, Better Dwelling.

Mortgages Over 90 Days Delinquent Drops

More serious delinquencies are a little more choppy, but still down on the quarter. The rate of mortgages more than 90 DPD, but under 120, fell 0.56 bps in Q3 from last year. This follows an increase of 0.33 bps in Q2, and shows a generally rising trend in 2019 with Q4 being an exception. Such a sudden swing is most likely attributed to payment deferrals. Earlier stage delinquencies were generally falling, but more people are carrying over into real delinquencies.

Mortgages With Serious Delinquencies Jump

Canadian mortgages with serious delinquencies made a sharp increase. Those over 120 DPD are up 2.39 bps in Q3, compared to the same quarter last year. This marks an acceleration of a trend that’s been rising consistently for the past few years. The CMHC only reports these numbers as relative, so this is likely a much smaller category than those 90 days or lower. However, it still shows consistent growth of severely delinquent mortgages.

A drop in delinquencies is what was expected over the past few months. The government rolled out many programs that should have frozen the numbers. RBC even noted some were delinquent before the deferral programs started. That explains the drop in early and mid-stage delinquencies. Severe delinquencies climbing into this period is a little more of a surprise. Despite a rise in programs to help avoid these delinquencies, the trend accelerated.

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  • fred 3 years ago

    Do not worry, Bank of Canada will pay instead.

    • P the Truth 3 years ago

      Agree with above, BoC is ultimate guarantor we can stop pretending data or reality matters

  • Marc 3 years ago

    Hello, I love the articles with all the statistics. Gives me such great insight to the housing market. Please please do an article as to where mortgage delinquencies are located in Canada. For example how many are in Toronto area, how many are in Calgary. Thank you very much

  • Liam 3 years ago

    They published City delinquencies a few days ago. I’m guessing they break it up so it’s not a 70 page report to read every week.

  • straw walker 3 years ago

    Denmark has a 20 year zero mortgage. Sounds crazy??

    • Trader Jim 3 years ago

      Low rates are a sign your economy is on life support. Denmark saw more out migrants last year than this year. Population is barely growing at this point.

      You can have expensive houses because the money’s cheap, or you can have expensive houses because of economic growth. If it’s because money’s cheap, you all but eliminated the reason to move there.

      • Richard 3 years ago

        The banks will be the one who will feel the pain, i am sure they all have already put aside funds away from their profit margin to face this issue, however those who will feel the real pain will the shareholders of banks who have already seen some valuation “adjustments” slowly spiraling down.
        Many Canadians who possess such stocks in their retirement funds.

  • Rob 3 years ago

    Is it possible to get a data pull of where these delinquencies are concentrated e.g. by city, neighbourhood, etc. ? Also curious if you guys have a PoV on leading indicators of delinquency by region/neighbourhood.

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