Canadians with supersized mortgages are requesting payment relief at a much higher rate than across the border. Both the US and Canada worked with banks to offer mortgage payment deferrals since March. Both countries launched their programs and had a sharp initial uptake at the same time. The rate of US mortgage deferrals have since peaked in June, and are now falling. In Canada, the opposite is happening, with the latest numbers showing deferral rates are still climbing. Canadian banks currently have 2x the rate of mortgages deferred as US banks.
Canadian Banks Have Deferred 16% of Mortgage Payments
Canadians have been taking advantage of mortgage deferrals at a rapid pace. When banks began taking applications at the end of March, hundreds of thousands came in. By the first week of April, 10% of mortgages were on payment deferrals. That number jumped to 15% by the first week of May, before climbing to 16% today. Since the program began, more and more Canadians have requested payment deferrals.
Canadian vs US Mortgage Payment Deferrals
The rate of mortgages on payment deferrals for Canada and the US. Given for the first week of the month, and the most recent data point.
Source: Mortgage Bankers Association, Canadian Bankers Association, Better Dwelling.
US Banks Have Deferred Over 7% of Mortgage Payments
The US government worked with banks to offer a similar mortgage payment deferral plan. By the first week of April, about 2.73% of mortgages were on payment deferrals. By the first week of May, it shot up to 7.91% of US mortgages on payment deferrals. The rate peaked in the first week of June at a whopping 8.55%, before falling down to 7.8% of mortgages this week. The number is still huge – it’s still nearly 8 mortgages out of every 100 not being paid. However, things are improving – which is a stark contrast to Canada’s numbers.
Canadians Requesting Deferrals At Nearly Twice The Rate
Canadians are deferring at twice the rate of Americans, and it’s getting worse again. Initially, Canadians were deferring at over 3x the rate at the end of March. The ratio dropped to about 1.4x the rate of Americans on May 10. Now the rate is back over 2x as of July 12. American payment deferrals are now falling, while Canadians are still requesting more. Canada previously planned this program would end in two months, however it’s difficult to see that happening if rates continue to rise.
Canada’s highly indebted households did exactly what people thought they would in an economic shock – begged for payment relief. Americans did so as well, but at half the rate of Canadians. Further, the US has been seeing the number of mortgage payment deferrals drop since June. To contrast, Canadians have actually requested even more relief.
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Defaults are about 2 points higher in the US, and that still doesn’t reach Canadian levels of deferrals. Wild.
Bank stonks are still propped up, despite little new revenue, not collecting payments, and a huge liability outstanding. Wild times.
When deferrals end,many people may be forced to sell. This could be exactly what causes a significant decline in prices. Maybe things will become more affordable soon. I think people should realize paying 500k for 1000sq sq. ft is a RIP off. That same house could be built for under 300k8
I wonder if people are taking the deferral because the bank won’t deny their request.
Or is it because people lost their job and on the CERB.
Guess we’ll find out in a few months if all the programs aren’t extended.
Only then can we see who’s swimming naked once the tide goes out. 🙂
When Home Mortgages make up roughly 50% of the asset value of Canadian banks and 16% (and climbing) are differing how long can they survive before they a) halt dividend payments (which drop their stock price) or b) use the bail in provisions the Canadian Government brought into existence in 2016?
One worrysome aspect is there is deliberate obfuscation by banks and govt on the issue of bail-ins of depositors savings.
I have to wonder though why everyone and his brother would not be rushing to the bank to get their money out in cash at the first instance of a bail-in by a western bank. Effectively a bail-in would cause more not less panic and a global bank run. Seems self defeating unless using that panic to ram through bankster issued digital currency only and banning cash is the objective.
The days of working hard, producing some useful service or product for society, saving and becoming well off are over.
These days its all about being politically connected, playing Ponzi games and profiting from it and finally dumping the losses onto the backs of taxpayers, savers, pensioners or wage earners.
It helps if you have CMHC, Bank of Canada and a load of academic economists babbling idiotic economic theories to provide cover for the theft.
A bail – in is a dilution of common shares
Debt will be covered with market issuance
Is that correct?
How would that affect deposits ?
As banks have been gambling with huge leverage with your deposits, not only will the share holders and bond holders be wiped out, the plan is to take your deposits and give you worthless shares.
This can take the form of hanging onto your deposits indefinitely with minimal withdrawls allowed only or no return of your deposits or return of your deposits after X number of years when the currency has been devalued significantly.
The globe and mail is reporting that the Canadian Banks are facing rising loan losses as the government support program get tapered off.
The banks were already made whole at the very start of the Covid shutdown by having transferred 150 billion of sub prime mortgage garbage off their books and onto the backs of taxpayers.
Bank of Canada handed CMHC $150 billion of taxpayer money and CMHC purchased toxic mortgage garbage from banks at 100 cents on the dollar. Right after that, CMHC promptly suspended dividend payment ensuring taxpayers started racking up losses immediately.
It’s a scam of privatizing bank profits and socializing their bad debt.
The big 6 chartered banks are well positioned to withstand deferrals turning into nonperforming mortgages…but the smaller schedule “1” regional banks are reporting much higher percentage of deferrals (western CDN reported 20%) and are doing “repos” with the BOC to maintain cash position ..This is not a good sign…any run on these banks will cause a severe situation.
Not just secured loans but unsecured loans are causing problems for these smaller banks as many of their clients are sub prime..(credit scores approaching 320)
We shouldn’t allow “investors” to defer mortgage payments at all. We need to force these real estate predators to sell. This is a crime against young families in cities like Vancouver and Toronto.
Investors have not been allowed to defer their mortgages. This is a program for home owners who live in their homes. Investors who have the same need are SOL unless they are an excellent customer of the bank and the bank wants to keep their future business.
will Daddy Trudeau come to the rescue
real estate is too big to fail now
going to get interesting
Does this mean I’ll be able to buy a house in my lifetime or not?