Observers warn of a possible tripling of the delinquency rate before the year ends
Mortgage delinquency rates are growing only in Toronto and Vancouver, with the rest of the country showing lower levels, according to Equifax data reported by the Canada Mortgage and Housing Corporation.
As of the end of the first quarter, the share of mortgage payments that were 90 or more days overdue was 0.29% – essentially unchanged from the quarter prior while declining by 3.3% annually.
Meanwhile, Toronto’s delinquencies shot up by 10% annually to reach 0.11% in Q1. Vancouver’s rate saw a similarly substantial 8.33% year-over-year increase, ending up at 0.13%.
For perspective, fellow top market Montreal saw a 13.3% annual drop in delinquencies to reach 0.26% during the first quarter. Industry information portal Better Dwelling said that this downward movement was “in line with the national trend.”
“Montreal normally has a higher delinquency rate than most of Canada,” Better Dwelling said. “[Now],it’s at the lowest level in at least five years.”
However, a recent TransUnion Canada study pointed to a possible sharp increase in delinquencies as one of the many post-COVID-19 risks that the market will face.
In its “2020 Credit Forecast,” TransUnion warned that the share of delinquent mortgage payments might essentially triple to 0.9% by the fourth quarter.
“As unemployment reaches levels not seen in several years, it’s important to take a step back and reassess how COVID-19 will impact the consumer credit market in the coming quarters,” said Matt Fabian, director of financial services research and consulting at TransUnion. “Elevated unemployment and its effect on consumers’ income and ability to pay debt obligations is a primary driver of increased delinquency.”
