Canada

One In Five of Canada’s Insured Mortgage Deferrals Are In Ontario

Canadians are suddenly short on cash for their jumbo sized mortgages. Canada Mortgage and Housing Corporation (CMHC), the country’s national housing agency, estimates over a tenth of insured mortgages are now on payment deferrals. The agency also added they expect the ratio of deferrals to nearly double over the next few months.

Quebec Has The Highest Ratio of Mortgage Payment Deferrals

By total volume of mortgages deferred, Quebec, Alberta, and Ontario are leading the country. The CMHC estimates 12% of insured mortgages across Canada are on payment deferral plans. Quebec represents the largest segment, at 27% the mortgages on deferred payment plans. Alberta is second with 26% of the insured payment deferrals. Ontario comes in third with 21% – just over one in five. Pricey BC is in a distant fourth, representing 7% of the pool. In terms of the total value of those mortgages, that’s a whole other story.

Ratio of Canadian Insured Mortgages On Defferal

The share of insured mortgages currently on deffered payment by province.

Source: CMHC, Better Dwelling.

Ontario Mortgages Represent The Most Value Deferred

Insurance-in-force (IIF) is an insurance term that describes the value of active policies. Ranking this ratio by province, we see the same largest segments in deferrals, but a slightly different order. Ontario’s IIF comes in at 34.8%, the biggest share of the total. Quebec follows with 21.6% of IIF in the latest estimate. Alberta is third with 18.2% of the IIF. BC is once again in fourth, with an IIF of 13.2% at reporting. Despite Alberta leading in the ratio, Ontario may be a bigger problem. That’s before you consider a valuation to fundamental price gap.

Canadian Mortgage Insurance-In-Force

The share of total insurance-in-force (IIF) by province.

Source: CMHC, Better Dwelling.

Insured Mortgages Deferrals Expected To Nearly Double

This is just the beginning of the deferral trend, according to the CMHC. The agency estimates the current 12% will rise to 20% by September. At this point, it’s unknown if we’ll see the ratio stay similar as more deferrals come in. Or if the increase of deferrals will be in the markets with the most sales activity in recent years. Either way, the ratio of deferrals are expected to rise a whopping 8 points by the end of summer.

In a short period, mortgage deferrals went from a minor statistic, to  a major market risk. Payment deferrals are designed to help people ride out an economic event. However, not many realize riding out an economic event sometimes means asset disposal. If people on deferrals can’t resolve payment issues before the end of the term, they may be forced to sell. Which brings up a whole other set of problems if you only had 5% equity, and one of the more negative forecasts are right.

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5 Comments

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  • Terrance 4 months ago

    There’s a lot to be torn about on this one. On one hand, major cities like Toronto and Vancouver have the biggest bubble disconnects. On the other, smaller cities are going to struggle with employment restoration.

    If I’m getting a discount on commercial space for the same rent in Toronto as it was in Hamilton last year, you better believe I’d prefer access to Toronto’s market over Hamilton.

    • Mortgage Guy 4 months ago

      Counter argument is companies have decoupled from office space, reducing the pressure on core employment. It’s an unspoken detail that cities try to attract major tenants to stimulate shopping in the core. Now they basically have to give everyone free office space to attract them.

  • Manoj 4 months ago

    Prices in Vancouver are so high, average detached houses and Townhomes is $1M plus. The average family salary in BC is about $70,000. In the past few months teardowns in Vancouver are selling for $1.4M.

    How are people able to buy these expensive properties? There has to be some sort of scam going on for banks to be advancing so much leverage to these subprime borrowers.

    Not everyone has cash to buy these properties?

    • zalzon 4 months ago

      I don’t know what the scam is either.

      But I’m sure it ends with the loss being shifted onto the backs of taxpayers OR with massive inflation to make these bad loans profitable once again thereby throwing savers, wage earners and pensioners under the bus.

      It has to be one or the other since we are living under a fraudulent system of Crony Capitalism where central banks pick winners and losers – the winners invariably being their bank cronies who’ve profited from issuing bad mortgages.

      The Bank of Canada buying $150 billion of sub-prime garbage mortgages from banks looks to be a first of many purchases. It was purchased at 100 cents on the dollar at the very start of the shutdown, while full knowing many of the mortgages will default. Essentially a transfer of losses from banks to taxpayers.

      That will be combined with behind the scenes purchases of more junk bonds and mortgages backed security garbage under the banner of central bank independence and saving the economy. Basically the same thing the US Federal Reserve is doing.

      Perhaps a stealth currency devaluation against the USD will also be attempted until US finds out and puts a stop to it.

      I’m sure BoC, CMHC have known for years that subverting the market and picking winners and losers is bad. But they will keep doing it if for no other reason than to not have the market collapse under their watch due to their earlier meddling. If it did, it would expose their complicity in the whole affair. Covid-19 in that sense is a godsend to explain away the collapse which was coming regardless.

      The most interesting statement I heard was from the new Bank of Canada chairman who started talking about “environmental concerns” of all things. It suggests big taxes on fuel consumption might be coming to pay for the above banker bailouts & bonuses.

      So that’s how I think these losses will be passed down from banks and house flippers to others.

  • Manoj 4 months ago

    Yes, the V has been the excuse used by the Green Peace (Al Gore) and Environmentalists. They failed in their attempt to convince the public to back their propoganda. They even found a 16yro Climate Expert! Nothing seemed to resonate with the public. So they shutdown the economy and now the Central Bankers and the Politicians have started talking about the Environment and looking to preach about climate change and its importance so they can justify funneling taxpayer funded grants to their lobbyists for Green Energy projects!

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