Canada

CMHC: Toronto and Vancouver Real Estate Delinquencies Rise, While The Rest of Canada Falls

Canadian real estate markets are seeing mortgage delinquencies fall… just not in Toronto or Vancouver. Equifax data crunched by the CMHC shows the national rate of delinquencies fell in Q1 2020. Breaking down the numbers, this trend is stronger in some real estate markets than others. Montreal for instance, is seeing their delinquency rates drop to multi-year lows. Toronto and Vancouver are on the flip side of the stat, and are actually seeing delinquencies rise.

Mortgage Delinquency Rates

The mortgage delinquency rate is the percent of mortgages overdue. Today’s Equifax numbers are mortgages that are more than 90 days overdue. Pretty straight-forward, but there’s two things to keep in mind – seasonality and level.

Mortgage delinquency rates, like other forms of credit delinquencies, tend to be seasonal. When looking at seasonally sensitive numbers, quarterly changes don’t tell us a lot. Unless there’s a sudden and abrupt change that’s not seasonally observed. Instead, it’s the year-over-year change of the quarter that’s more important.

The next note to keep in mind is there’s no universally high or low level for delinquencies. Some regions like Montreal, have always had higher levels of delinquencies. Cities like Toronto and Vancouver are always lower than the national level. With regional variances like this, it’s more important to focus on the velocity of change. If Vancouver had the same level of delinquencies as Montreal, but with Vancouver supersized mortgages – it would be catastrophic for the economy. It only needs to be up a few points for real estate markets to be in trouble, before it becomes an emergency.

Canadian Mortgage Delinquencies Fall

Canadian mortgage delinquencies were falling across the country in the first-quarter. The rate of mortgage delinquencies fell to 0.29% in Q1 2020, unchanged from the previous quarter. Compared to the same quarter last year, this was 3.3% lower. Since delinquencies are seasonal, the quarter over quarter change is less significant than the annual change. In this case, the delinquency rate was improving on the national level.

Canada Q1 Mortgage Delinquecies

The rate of mortgages that are 90 days overdue.

Source: Equifax, CMHC, Better Dwelling.

Toronto Mortgage Delinquencies Rise 10%

Toronto mortgage delinquencies are rising from all-time lows a few years ago. The rate reached 0.11% in Q1 2020, unchanged from the quarter before. Compared to the same quarter last year, this was 10.0% higher. This was the biggest Q1 for mortgage delinquencies since 2017. A key difference between then and now being it was falling back then, and it’s rising now.

Toronto Q1 Mortgage Delinquecies

The rate of mortgages that are 90 days overdue.

Source: Equifax, CMHC, Better Dwelling.

Vancouver Mortgage Delinquencies Rise 8%

Vancouver real estate is seeing mortgage delinquencies climb once again. The rate of delinquencies reached 0.13% in Q1 2020, unchanged from the previous quarter. Compared to the same quarter last year, this is 8.33% higher. Vancouver hasn’t seen a Q1 rate this high since 2017, which wasn’t all that long ago. However, like Toronto, it’s going in the opposite direction right now.

Vancouver Q1 Mortgage Delinquecies

The rate of mortgages that are 90 days overdue.

Source: Equifax, CMHC, Better Dwelling.

Montreal Real Estate Delinquencies Fall Over 13.3%

Montreal real estate is following the national trend, and seeing falling delinquencies. The rate of mortgage delinquencies fell to 0.26% in Q1 2020, down 1 bp since the previous quarter. Compared to last year, the rate is 13.3% lower. Montreal normally has a higher delinquency rate than most of Canada. However, it’s at the lowest level in at least 5 years.

Montreal Q1 Mortgage Delinquecies

The 12 month percent change of real estate prices in Montreal, according to the TNB HPI.

Source: Equifax, CMHC, Better Dwelling.

Rising mortgage delinquencies are easy to dismiss as pandemic related. That is, until you realize it takes 90 days of non-payment for a loan to become delinquent. This means the rising rate is an issue that presented itself before the pandemic hit. The government’s mortgage deferral plan that began in Q2 is likely to slow the number of reported delinquencies. However, this trend is expected to resume and triple by the end of this year.

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12 Comments

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  • GTA Landlord 2 months ago

    Was there any doubt that’s what the deferral program was about? If not, why did they calculate the CERB amount based on the amount of mortgage payments and living expenses, and still offer mortgage deferrals? People that are still working are getting slaughtered by their mortgages.

    • Ali 2 months ago

      If prices are rising in Toronto, why aren’t people just selling?

      • KG 2 months ago

        They aren’t rising, that’s the thing. Detached homes are bumping higher, but no where near where they were 2 years ago. Condo prices are starting to slip as inventory swells. Look at the numbers, not the statements being made from boards.

  • Jessie Cass 2 months ago

    If this is what bank loans look like, imagine what private lenders look like right now.

  • Kathleen Thomson 2 months ago

    Only going to get worse with already negative cap landlords losing money, and not even collecting minor rent to offset.

  • Fight Back 2 months ago

    The government is artificially propping up the biggest real estate bubble in Canadian history. We need to investigate these politicians and their ties to real estate industry. All government officials (elected or not) needs to make public how much real estate they and their families own!

    Time to let prices come back down to reality.

    Real estate investigation now!

  • Kolf 2 months ago

    When deferrals were put in place banks made sure a deferred mortgage dont get flagged as delinquent….. So the actual deliquency rate is much higher because what you are seeing now is not taking into account those deferred but should be deliquent..

    What does it mean? Let me put it this way, from risk management perspective it would actually make more sense to foreclose on high risk customers with multiple investment properties asap because you want to sell these properties before the foreclosure wave hits. This way you maximize your recovery amount from deliquent mortgages.

  • BDMan 2 months ago

    LMAO. Slow news day?

    Increase of 10% from 0.1% to 0.11% means nothing.

    • Anthony 2 months ago

      It seems insignificant but real estate represents around 74% of Canada’s wealth as a nation (around $11 trillion). Even fractions of percentages can be meaningful in certain contexts.

      • KL 2 months ago

        It’s just the difference betweeb 1.1 trillion and adding an extra $110 billion to $1.21 trillion. A rounding error if you don’t understand math. Must be a real estate agent.

        • RainCityRyan 2 months ago

          It could be a rounding error.
          If it was the first data point in a trend it would be easier to ignore, but it’s compounded by the 2018-2019 yr/yr change as well.

          Can you extrapolate from these? Well it’s not a very strong movement, but it is directly counter to that of the rest of the country.

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