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 DPDThe 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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