What happened to the deferral cliff?
New mortgage market trends have begun to emerge amid the COVID-19 outbreak, according to a fresh industry analysis by LowestRates.ca.
“Since the pandemic began, speculation about its effects on the economy, especially on housing, [has] been rife,” said Justin Thouin, founder and CEO of LowestRates.ca. “Some of that speculation was misguided. The housing market is far stronger than anticipated, and is set to become even stronger when the economy rebounds.”
The most significant of these missed predictions has so far been the much-feared “deferral cliff” that was expected by some to materialize this fall.
“The mortgage deferral cliff that was expected to gouge the housing market never arrived,” LowestRates.ca said. “The end of deferrals may have much less of an effect than previously thought.”
Speculations on the negative impact of deferrals might be premature, said Paul Taylor, president and CEO of Mortgage Professionals Canada.
“There’s an awful lot of factors at play,” Taylor said. “You might find that some people will emerge from the deferral program able to resume making payments,” chief among these being households whose incomes have benefited from federal financial assistance programs.
“I don’t think there’s really going to be a cliff,” said Leah Zlatkin, principal broker at Brite Mortgage. “There’s going to be more of a little ditch… It’s going to be a slow-rolling process because this kind of thing doesn’t happen overnight.”
This optimism is supported by the fact that, according to the Canadian Bankers Association, more than half of borrowers nationwide have already resumed their regular payment schedules.
Another major trend that has taken shape is the increase in the average down payment, especially in the traditional housing powerhouses of Ontario and British Columbia. Between April and September, Ontarians put down 19.8% on average, while BC residents put down 21.85%. Residents in Alberta, Quebec, and Nova Scotia were found to have put down significantly less than 20% during the same period.
Taylor attributed this disparity to the greater number of high-paying jobs in Toronto and Vancouver – the kind of jobs that can often be done remotely, thus making home ownership more attractive for these high-earners.
“The economic impact of this has disproportionately impacted people that were in lower wage jobs to begin with,” Taylor said. “And so a lot of people that were in more salary-based types of professional roles have been far less impacted. I think a lot of those salaried employees are feeling confident again … coupled with people re-evaluating their living circumstances.”
