Canada

CIBC’s Uninsured Mortgage Delinquency Rate Is Flat, But Toronto Is An Exception

Quarterly filings from one of Canada’s largest banks shows unusual weakness in Toronto. CIBC data shows their uninsured mortgage delinquency rate generally fell in Q1 2021. One notable exception is Greater Toronto, which is seeing the rate climb. A rise in the delinquency rate is unexpected for a market with high sale volumes and low inventory.

Canadian Uninsured Mortgages

Uninsured mortgages are those with no securitization against losses, and aren’t as risky as they sound. For a borrower to qualify, they need to have a downpayment of over 20% of the home’s value. They also tend to pay a slightly higher interest rate. In exchange for the higher down payment and more interest, the borrower doesn’t pay the bank to insure it. The bank can still insure it, but they don’t get to pass the thousands of dollars in costs on to you.

It’s not impossible for the bank to lose money on an uninsured mortgage, but it’s hard. The borrower would have to stop making payments, and the home would have to plummet in value at the same time. More of a perfect storm situation than one that would occur on a wide scale basis. 

CIBC’s Mortgage Delinquency Rate Falls

The mortgage delinquency rate is lower than the previous quarter, and flat from a year before. Uninsured mortgages over 90 days past due reached 0.24% in Q1 2021, down 4 bps from the previous quarter. The rate is flat from a year before, which is surprising for a different reason that you might expect.

The bank made it a lot harder to fall into delinquency during the pandemic. Which is a good thing, since it demonstrates they really don’t want your house. Borrowers almost had to try and avoid their bank’s help with a mortgage to become delinquent. Flat at a time when banks are this generous is unexpectedly high.

CIBC Uninsured Mortgage Delinquency Rate

The quarterly delinquency rate of uninsured mortgages held by CIBC, at the national level and for selected CMAs.
Source: Regulatory Filings, Better Dwelling.

Toronto’s Mortgage Delinquency Rate Rises

Greater Toronto’s uninsured mortgage delinquencies increased, despite the suburban market boom. The rate of mortgages over 90 days past due reached 0.17% in Q1 2021, 1 bp higher than the previous quarter. The rate is also 3 bps higher than the same quarter a year before.

Experts are generally split when it comes to observing these kinds of measures. On one side, the rate is still lower than the national average, so they consider it outperforming. Others argue delinquencies have a regional influence, and the direction of the rate is more important.

For example, Montreal delinquencies are likely to always be higher than Toronto. It doesn’t mean a decline in Montreal isn’t an improvement. Likewise, Toronto is likely to be lower than other cities, and deterioration is deterioration.

Vancouver’s Mortgage Delinquency Rate Falls

Greater Vancouver’s uninsured mortgage delinquency rate fell, but was strangely elevated. The rate of mortgages 90+ DPD reached 0.14% in Q1 2021, 7 bps lower than the previous quarter. The rate is also 1 bp lower than the same quarter last year. Yeah, 7 bps lower than the previous quarter. It’s unclear why, but CIBC saw a delinquency rate of 0.21% in Q4 2020. That was almost as high as the national rate, which is unusual for Vancouver.

CIBC’s uninsured mortgages delinquency rate fell at the national level, with a big exception. The region has a lower than average rate, but as previously stated, Toronto always does. It’s unusual for a city that’s printing record high prices with low inventory, see a higher rate of delinquency. More people are turning delinquent on their property, when they could just list it for sale. Some captains will always go down with the ship, regardless of whether there’s extra lifeboats.

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2 Comments

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  • Ethan Wu 1 month ago

    Interesting data. Assuming CIBC has similar quality control to the other Big Five, and isn’t an outlier for some reason, the arrears rate is 70% higher in Greater Toronto than it is for the whole province of Ontario.

    Vancouver to contrast is lower than the last provincial numbers.

    Brings up a lot of questions about deferrals, but the top question should be is the arrears rate higher because of investors? They weren’t treated to deferrals, but it’s still odd considering homes are selling very quickly in the GTA, and prices are rising so fast.

    • Bob Walter 1 month ago

      I would not expect to see a movement of the needle pandemic related until Q3/Q4 of 2021.

      The people who cannot pay are on deferral, and the deferrals have caused an increase in financial buffers. Once deferral ends and the extra money runs out.

      Also you would not expect to see movement pandemic related, before the demand drops and the supply increases
      Everyone who is behind payments and wants to sell, should be able to sell, before the arrears becomes a problem. Only when you have a crappy condo in downtown it might take longer to sell, or they will be the first batch of arrears because they were not able to sell in time.

      What would cause a drop in demand/increase supply?
      1) Everyone who wants a house or wanted to move because of the pandemic, they moved.
      2) Already there’s people who realize living rural is not ideal (have to jump in car for 10 minutes to run to the store and such, bummer.. should have thought of that before)
      3) Canada is building 18 new houses for every person added to the population
      4) Students tanked
      5) Immigration tanked (good luck competing with the US, Joe Biden is already accepting everybody with a pulse)
      6) Highest unemployment in the G7 for Canada

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