Canada’s mortgage delinquencies are flat, but that story is much more interesting by region. Canada Mortgage and Housing Corporation (CMHC) data shows mortgage delinquencies are flat in Q3 2020. It’s a little different looking at the biggest real estate markets though. In Toronto and Vancouver, delinquencies are still rising to multi-year highs. Montreal is performing as expected, with delinquency rates falling, likely helped by payment deferrals.
First, a quick note on mortgage delinquencies and how to read them. Obviously higher levels are worse, but some regions will always have higher levels. Montreal is higher than Toronto, at almost any point in recent history. It’s not because it’s doing worse, but because of regional differences. This means cross-comparison of cities isn’t particularly useful.
Instead, like most money indicators, the velocity of change is more important. If Montreal is falling from long-term averages, that’s considered a market positive. If Toronto’s indicators are rising from lows, things are getting worse. It doesn’t matter if Montreal is higher than Toronto, or vice versa. What seems normal in Montreal, would be disastrous in Toronto. The odds of both markets approaching a similar level is slim to none.
Canada’s Mortgage Delinquencies Are Flat
Canada’s mortgage delinquency rate is trending flat at the national level. The rate was 0.3% in Q3, the same as the previous quarter. This was also flat from the same quarter last year. Not a lot happening when looked at in aggregate. Breaking down major real estate markets though, we see a lot more movement.
Canadian Mortgage Delinquency Rate
The quarterly rate of mortgages that are delinquent across Canada.Source: CMHC, Equifax, Better Dwelling.
Toronto Mortgage Delinquencies Hit Highest Level Since 2016
Toronto’s mortgage delinquency rate is climbing, and is at the highest level in years. The rate hit 0.12% in Q3, up 9.1% from the previous quarter. The quarterly increase is the same compared to last year. This is the highest delinquency rate Toronto has seen since 2016. A big difference between then and now though, is the trend was moving in the other direction.
Toronto Mortgage Delinquency Rate
The quarterly rate of mortgages that are delinquent across Greater Toronto.Source: CMHC, Equifax, Better Dwelling.
Vancouver Mortgage Delinquencies Hit Highest Level Since 2016
Vancouver’s mortgage delinquency rate is climbing, and is also at a multi-year high for the region. The rate reached 0.16% in Q3, up 6.7% from the previous quarter. Compared to the same quarter last year, the rate is 23.1% higher. The sharp annual increase puts delinquencies at a rate not seen since 2016.
Vancouver Mortgage Delinquency Rate
The quarterly rate of mortgages that are delinquent across Greater Vancouver.Source: CMHC, Equifax, Better Dwelling.
Montreal Mortgage Delinquencies Fall And Are At A 5 Year Low
Montreal’s mortgage delinquency rate is falling, and is now at the lowest level in at least half a decade. The rate fell to 0.25% in Q3, flat from the previous quarter. The rate is down 10.7% from the same quarter last year. This is the lowest rate in at least the past 5 years, but likely goes back much further.
Montreal Mortgage Delinquency Rate
The quarterly rate of mortgages that are delinquent across Greater Montreal.Source: CMHC, Equifax, Better Dwelling.
Rising delinquencies are odd to see at this moment, considering market activity and policy measures. Rising delinquencies are usually a result of constrained liquidity, a.k.a. a lack of buyers. In this market, Toronto and Vancouver are seeing price increases and record sales. It’s odd to see anyone fall delinquent in the current narrative.
Further, the government rolled out a number of policy measures to prevent delinquencies. The vast majority of people that requested mortgage payment deferrals, received them. This should have made the rate lower than usual. Other segments of credit subject to similar circumstances are coming in unusually low. Montreal’s delinquency rate is more typical of what was expected, considering the odds of failure were sharply reduced.
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Remember the yield curve inverted well before the pandemic. This recession was happening anyway. Helicopter money can only delay so many issues.
I wonder how many of these were in default before the pandemic?
BOC shifting to long-term bond buying is going to crush future rates, and result in another issue a few years after this one. You can only pay everyone’s bills so many times in a lifetime.
They crushed fixed income to print housing credit. I wouldn’t be surprised if these are all seniors that are defaulting.
Toronto has the same listings going up, and coming down every few days. It wouldn’t surprise if these are all owners that listed multiple times and failed.
Same with Vancouver. Although I’m surprised if there’s no market, the don’t just lower the price to exit. Unless you bought recently, you have a significant equity cushion to fall back on.
Mortgage payment defaults were only good for owner-occupied homes.
Wouldn’t be surprising if the ones in Vancouver are speculators that are holding buildings that are uninhabitable, and having a hard time refinancing.
Negative cap owners that can’t tenant lower, and borrowed the downpayment are also possibly a big one. Statistically, prices are only down 5% in the city core for condos.
Now say you did a private mortgage at 8% with negative caps, and you were hoping the rise in equity was going to make it high enough that you could refi-at a regular lender? It sounds insane, but this is what I’ve actually heard real estate investors say their agent told them to do.
Real estate prices may always go up, but not for everyone at the same time.
Not a fan of seeing people lose their home, but am a huge fan of seeing those landlords that kicked people out and brag about it on social lose their property because they’re unable to tenant. That should be a whole cable TV channel.
You ever go on Reddit, Jim? Check out the Personal Finance Canada subreddit. That’s what ALL those big brains were doing.
Didn’t we try printing money in the 30s already??? How did that go?
The problem with housing is people who are hoarding. So we need to tax people with multiple residential properties.
When Canada printed money in the 1930s, the economy, which had dropped by 70%, recovered by 77%.
Financial crises destroy money, and leave a debt overhang, so when deflation hits, debts get even harder to manage. Who you print money for makes a difference.
No you don’t have to tax people with multiple properties. That’s not how you fix a housing shortage or an asset bubble. You should tax people who are sitting on vacant properties. In this case if they can’t find tenants it would force them to sell sooner than later and perhaps they won’t get wiped out. Inventory would help families buy homes.
I partially disagree. I believe we should tax the 3rd property and above. The first 2 properties can be held tax free. Property hoarders that hold 3 or more properties tend to use equity takes outs as a form tax deferred income which is deferred till they sell or pass away. If they hold these properties in a holding company then the tax is deferred even further.
I wonder if people are holding on longer than they might otherwise do in the hopes of things going back to “normal” soon.
This has to end one way or another. Look what a quarter million buys you these days in Niagara https://www.realtor.ca/real-estate/22683883/175-burgar-st-welland
What? That’s a lot of house! 🙂
The worst part is most Canadians will see the teardown you posted in a small town for a quarter mil, and think it’s a huge deal.
BS headline. During the financial crisis in 2009 mortgage default rates in certain States was over 25%. You’re making a headline of default rates under one quarter of one percent. Statistically zero. Move along…nothing to see here…
Why make up a fact that can easily be googled? The Great Recession peaked at 9%, BECAUSE THEY CALCULATE DELINQUENCIES DIFFERENTLY.
Canada only includes major banks, non-bank lenders that submit to the survey seperately, and includes 90+ day delinquencies. Omitting private lenders, which fund over 1 in 10 new transactions in some cities, obviously takes a lot off the book.
Imagine what the US rate would be if you excluded all subprime lenders as well.
The US includes all over due. Not just a couple of prime lenders, where it’s over 90 days.
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