Deferrals are also contributing significantly to Canada's mounting mortgage credit balance, according to observers
Slower sales during the COVID-19 outbreak have not stopped Canadians from borrowing, with the monthly gain seeing its largest April increase since 2009.
Bank of Canada data indicated that as of the end of that month, Canada’s total outstanding mortgage credit was at $1.65 trillion, up 0.60% monthly and 5.8% annually.
Real estate information portal Better Dwelling said that these results were among the strongest in several years.
“The monthly increase of 0.60% is the biggest for April since 2009. The 5.8% is the highest year-over-year growth since August 2017,” Better Dwelling said in its analysis. “Part of this is due to mortgage deferrals – over one in ten mortgages are no longer making payments. If there’s no payments to reduce the balance, the total swells more easily.”
Figures from the central bank showed that deferrals accounted for more than 14% of the $1.24 trillion in residential mortgages that the nation’s chartered banks held as of March.
“This means many mortgages are seeing balances rise due to a lack of payment, instead of new borrowing,” Better Dwelling said.
Evan Siddall, chief executive at Canada Mortgage and Housing Corporation, said that prolonged deferrals might lead to as much as 20% of mortgages becoming delinquent by September – a prediction that has been contested by multiple industry observers.
“A team is at work within CMHC to help manage a growing debt ‘deferral cliff’ that looms in the fall, when some unemployed people will need to start paying their mortgages again,” Siddall said. “As much as one fifth of all mortgages could be in arrears if our economy has not recovered sufficiently.”
