One of the Big Six Canadian banks is seeing an uptick in delinquencies in a key Canadian real estate market. CIBC generally observed a decline in delinquencies for uninsured mortgages in Q2 2021. The data, presented to institutional debt investors, did have one exception — Vancouver. Greater Vancouver’s uninsured mortgage delinquencies made an unexpected surge higher.
Uninsured Mortgage Delinquencies Are Lower Across Canada
Uninsured mortgage debt is generally falling according to the bank’s numbers. They reported a delinquency rate of 0.23 percent in the second quarter of 2021. It was down 1 basis point (bps) from the previous quarter. The quarter is also significantly lower than the same quarter last year. This is generally expected in the current environment.
Lower delinquencies may appear odd right now, but people really need to try to default for it to happen. High demand for real estate with low inventory means if you fall behind on payments, you can sell before defaulting. This used to be a privilege only hot markets like Toronto and Vancouver enjoyed. Now with national home sales looking frothy, it shouldn’t be a surprise to see it everywhere.
CIBC Uninsured Mortgage Delinquencies
The quarterly rate of uninsured mortgage delinquencies at CIBC.
Source: CIBC; Better Dwelling.
Then there are the mechanics of lending right now. Lenders really don’t want the properties, they want the payments. They’ve never been more relaxed about extending payment or deferral programs. There are also refinancing options, considering the massive equity windfall owners just saw. Shouldn’t be a surprise to see delinquency rates fall with this many options.
Greater Vancouver Mortgage Delinquencies Made An Unusual Surge
Greater Vancouver real estate didn’t get that memo though, showing one of the few climbs for any region. The delinquency rate climbed to 0.24 percent in the second quarter of 2021, up 10 bps from the previous quarter. Compared to the same quarter last year, the delinquency rate climbed by a third. It’s a little odd for Vancouver, which usually outperforms the national numbers by a wide margin. This time it’s a bps above it, when it comes to insured mortgages. I can’t recall a previous period where it was higher, tbh.
Greater Toronto Mortgage Delinquencies Fell Slightly
Greater Toronto real estate is seeing delinquencies head in the other direction. The rate fell to 0.16 percent in the second quarter of 2021, down 1 bps from the previous quarter. It’s down from the 0.18 percent reported last quarter as well. Toronto has seen a much lower rate than national delinquencies over the past few years. That would be a result of it being a market with such high liquidity.
Oil Provinces Have A Higher Delinquency Rate
Canadian oil provinces are much higher than the national rate, but the rate is stable. The delinquency rate climbed to 0.63 percent in the second quarter of 2021, up 3 bps from the previous quarter. Compared to last year, it’s down slightly from the 0.64 percent reported in the same quarter. Due to a boom-bust commodity cycle, delinquencies in this region are always higher than BC or Ontario.
Mortgage delinquencies are generally low, and heading lower for most of the country. Greater Vancouver is an odd exception, but one quarter can be a trend reversal… or blip. We won’t know for a couple more quarters. As for the rest of the market, delinquencies are much lower than they usually are. While that sounds good, there is such a thing as too low of a rate of delinquencies. It’s indicative of a real estate bubble.
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How many of these were “students”?
The funniest part is prices are rising at the same time. imagine prices rising, and instead of selling you’d rather default and get kicked out of the home?
Average wage in Canada is $60,000 CAD while the average home price in Canada is $800,000 CAD. Cost of living, taxes, more taxes, expensive food, expensive transit if not using car, expensive car insurance, expensive gas, expensive clothes, expensive electricity, banking fees, expensive plane tickets and vacations, expensive schooling, expensive internet, expensive phone lines, expensive restaurants, expensive fast food joints, expensive nick-nacks, expensive electronics….assuming you manage to save HALF of the average income every year it will take the average person 27 years to pay off their average $800k mortgage and that’s EXCLUDING interest upon principal. Is the average person dumb or is the average person betting that their average home price while increase? Probably both.
This isn’t sustainable, this was never sustainable.
– D
Expensive slavery in Canada, cause its NUMBER UNO in the World.
For housing fair ratio should be not more than 1/4 of your income.
Canada used to be better place to live. Housing was more affordable. However, I was always surprised about much higher costs of goods compere to USA and enormous taxes for average employee. Even if you take into account medium quality free health care, cost of living is a big burden on Canadian working class.
Its immoral to invest now into Canadian real estates, you feel that your are part of big cartel against regular hardworking Canadians.
My take on current situation with real estates. I would never participate in bidding wars.
There are plenty of other places to invest in different sectors of your state economy and make decent profit.
I keep hearing the housing inflation narrative is due to money printing. Sure that’s true. It’s what got us to where house prices are today. However, given how high prices currently are and how far off they are from fundamentals, I believe investors will find better alternatives to invest in with much less downside risk, more liquidity, and lower barrier of entry. Aside from the tech stocks with insane valuations I think the stock market still has lots of room to run. So my guess is there will be a lot of money continuing to flow into the stock market. And if you still want to participate in real estate, you can; just buy REITS and do so indirectly.