Late Mortgage Payments In Ontario Fall To The Lowest Since The 1990 Crash

Late Mortgage Payments In Ontario Fall To The Lowest Since The 1990 Crash

Despite soaring home costs, Ontario residents are approaching a record low number of late payments on their homes. The Canadian Bankers Association (CBA), the mouthpiece for the banking industry, has published statistics showing late mortgage payments have fallen to its lowest level in almost three decades. The industry is about to tout this as a good thing, but it really isn’t.

Drops To Lowest Level In 27 Years

The number of mortgages in arrears has fallen to a 27 year low in Ontario, as far back as the CBA has been tracking. February 2017 saw only 0.12% of mortgages fall into arrears, a 20% decline from the same month last year. This is a massive 66% lower than the 27 year average of 0.36%. This highly irregular level of mortgages in arrears was last seen in February 1990.

Source: Statistics Canada.

Last Time It Was This Low, The Market Crashed

Vanilla Ice, and the Teenage Mutant Ninja Turtles are probably the only thing you remember about the early 1990s. If you’re from Toronto however, ask your parents about it and you’ll probably hear all about the ancient Toronto real estate crash. At the end of 1989, Toronto real estate had an average sale price of $273,698 ($484,953 in today’s dollars). Average prices slipped starting in 1990, when they fell 6.82%. They continued to slide until 1996, losing 27.6% from the peak.

Source: TREB.

Why Did That Happen?

As another Better Dwelling author pointed out, it’s all about liquidity. In highly liquid market, a.k.a. a market where buyers outnumber sellers by a large margin, there’s little reason to fall behind on your payments. Things get tough, list your home and a buyer will buy it before you fall behind. When buyers become irrationally exuberant, start engaging in bidding wars and waiving inspections, there’s absolutely no reason you should fall into arrears. This is pretty much the market Toronto is experiencing right now – although there’s some signs that things are starting to cool down.

Eventually a market factor convinces buyers that they’ve been acting irrational. Buying slows down, but doesn’t necessarily stop. Prices start to pull back a little, and sales take a little longer to close. This is when liquidity starts to dry up, and homeowners might find themselves in a sticky situation where they can’t unload their property before the payments become late. This is when people start falling behind in their payments. As more people become desperate and slash prices, buyers start to take even longer, as they now have more choice in inventory. This eventually starts forcing arrears higher until something gives buyers a reason to return to the market.

Conventional wisdom says that a low number of mortgages in arrears is a good thing. That’s true, to an extent. However, unnaturally low levels held for an extended period of time should be approached with a bit of skepticism. Wages are stagnating, debt is at record levels, and even Ontario’s suburbs are seeing home prices soar by insane levels. You didn’t really think everything was booming, did you?

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  • Reply
    Jungle 5 months ago

    Don’t forget bankruptcies are also at all time lows because… more people are refinancing debt using their home equity. So defaults are being hidden by increasing debt.

    And to make matters worse: 40% HELOC don’t even make a payment

    • Reply
      Khan 5 months ago

      Jungle fk fake name…Try to get new name ….You will never able to buy house with this mentality…..

  • Reply
    Tommy 5 months ago

    All great info, the difference between 1989 and now is sheer population size and demand. The pullback is temporary as buyers, invetors, and speculators take a breathe to see how the new regulations play out. prices have not come down at all yet, and if they do, it will do so slowly (years) like it has for all previous crashes. This time around, there are enough people inside Ontario and outside of Ontario with the means to buy and keep the market chugging along.

  • Reply
    George 5 months ago

    Tommy… you are full of poop if you think prices haven’t come down at all.

  • Reply
    srsly 5 months ago

    My wife’s family lives in Calgary and say bank helped them avoid foreclosure.

    Her dad lost an oil patch job in 2015, so they were on his EI, mom’s small income (works retail) and income from a tenant in their basement. EI ran out late 2016, and then tenant lost their job and stopped paying rent. We’ve given them money to make ends meet.

    After missing a mortgage payment earlier this year, bank scheduled a talk with a financial adviser and offered a variety of options including shifting payment dates, partial payments/interest only. They’ve gone interest only for several months until a month ago when her dad found a part time job and tenant caught up on their missed rent (also found work).

    I don’t know if this is a common scenario, but wonder how it would be reported

  • Reply
    Andy 5 months ago

    Im from syria we are happy with this water…. Justin trudeau please bring the entire syria please please …….Many of us still not able to find jobs ….Please provide more benefits and own house, we can find jobs and sponsor all our wives…..

  • Reply
    Ontarians Doing Well to Keep Up with Mortgage Payments - Burlington, Hamilton, Oakville, Mississauga and Toronto Mortgage Brokers | Loewen Group Mortgage Professionals 4 months ago

    […] In an article from Better Dwelling, it shows the latest statistics from the Canadian Bankers Association in which it details that, although home prices are extremely high, homeowners are maintaining pace when it comes to making their mortgage payments. […]

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