When COVID-19 led to lockdowns and layoffs early in 2020, there was widespread concern of a looming spike in mortgage defaults.
Yet, despite a record rise in Canadian mortgage debt and home prices in nearly every province, the expected increase never happened.
Total residential mortgage debt in Canada is now $2.14 trillion, according to Statistics Canada, the highest level on record.
But a Canadian Bankers Association (CBA) report released October 14 revealed that, as of July 31, there were only 9,157 mortgages in arrears out of total of 4.97 million residential mortgages in Canada.
This amounts to a 0.18% default rate – considered low even by the Canadian standard, which traditionally has a default rate in the 0.30% range.
A mortgage default is when at least three consecutive monthly mortgage payments have been missed.
The CBA found the two provinces with the highest average home prices, Ontario and B.C., also had the lowest mortgage defaults. In Ontario, just 0.07% of mortgages were underwater as of July 31; B.C. had the second-lowest default rate at 0.13%.
Alberta, with a default rate of 0.49%, and Saskatchewan, where 0.68% of mortgages were in default, had Canada’s highest rate of problem mortgages.
Still, this means that fewer than 3,000 of the nearly 600,000 mortgages in Alberta and only 895 of Saskatchewan’s 132,489 mortgage holders were behind in monthly payments.
In a separate report, the Bank of Canada included these key reasons for “the lack of a noticeable increase in payment arrears despite the large economic disruption caused by the pandemic:”
•employment and economic activity have rebounded strongly from their troughs in spring 2020;
•policy-makers have provided households with considerable financial support and continue to do so; and
•monetary policy actions (through the Bank of Canada) have pushed short- and longer-term interest rates lower, making credit more affordable for households. •