Time for your cheat sheet on this week’s top stories.
Canadian Real Estate
Canadian Mortgage Delinquencies Rise 24%, Ontario Hits $1 Billion: Equifax
Canada’s credit bubble may finally be reaching its crescendo. Credit rating agency Equifax notes the national mortgage delinquency rate is lower than Q1 2020. However, more expensive regions like BC and Ontario have seen rates that exceed those levels. The latter actually reached a record dollar value in back payments, surpassing a billion dollars. It’s not just mortgages though—borrowers without one are also increasingly falling behind, with a whopping 1.26 million people missing at least one payment. This is the highest level since outside of the 2020 surge when the economy was physically locked down.
Bank of Canada Warns Interest Rates Won’t Return To Pre-Pandemic Levels
Canada is the first G7 country to cut rates and start an easing cycle, but don’t expect easy credit. The Bank of Canada (BoC) told businesses and households the era of low rates are over, and rates are unlikely to return to pre-2020 levels. Speaking to finance professionals, the BoC Governor stated inflation can accelerate much faster in the current environment, citing geopolitical risks and emerging new technologies. It’s also worth noting that the Great Recession led to low rates to address inflation concerns. The economy doesn’t require credit-driven stimulus since inflation is back above target.
Canadian Mortgage Borrowers Are Too Indebted To Fail At Big Six Banks
Canadian mortgage borrowers are the new “too big to fail,” a bit of a surprise for even the regulators. Mortgage amortizations are typically limited to 25 years, as regulators find it unfair for households to perpetually carry interest payments. However, despite being stress tested, many borrowers claim they can’t repay the amount borrowed. The country’s bank regulator is now forced to allow extended amortizations that far exceed this limit, or risk a wave of defaults. Now four of the Big Six banks have borrowers with amortizations 35 years or longer, a length of repayment previously considered reckless since it means interest payments for longer than a generation. That’s a trend Canada is increasingly becoming more comfortable with, as its state-backed mortgage insurer begins the process of extending mortgages for up to 55 years to help mitigate mortgage delinquencies.
Canadian Real Estate Markets Won’t See A Big Boost From Rate Cut: BMO
The Canadian real estate industry was expecting a rate cut to revive demand. Not so fast, warns one of the country’s largest banks. This week economists from BMO remind analysts the cut only impacts variable rate loans, and fixed rate loans are much cheaper. Bluntly put, the cut can only provide a sentiment boost. Since lower interest loans are already available, there’s no fundamental impact to credit easing when it comes to borrowing. According to the bank, affordability will still be stretched until mortgages fall below 4%, home prices fall 12%, and/or income rises to make up the gap. None of those factors are within sight near-term.
Toronto Unemployment Hits 317k People, More Than All of Quebec
Canada’s largest city is now one of the world’s largest unemployment hubs. Toronto CMA has seen a sharp uptick in unemployment, far exceeding the national climb. The City is now home to more than 317k unemployed people, more than the total of unemployed people in all of Quebec, the second-most populated province in Canada. It’s an issue likely to impact the region’s real estate market, which has seen slow home sales and rising rental vacancies despite a population that’s supposedly growing very rapidly.
The Banks and mortgage lenders are making record profits and they still want more!
If you have family that has been paying the mortgage on time why would you want to rise the rate higher??? As always the rich is stealing from the poor !!!