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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