Mortgage growth spiked last year and delinquency rates are improving; but CMHC is still calling for caution from consumers
Mortgage growth spiked last year and delinquency rates are improving, according to a new report from CMHC.
Last year saw approximately 1.03 million new mortgage loans at a total of about $269 billion, which represents a 9% year-over-year increase.
In light of that mortgage growth, the Crown Corporation remains vigilant about the risk household debt poses to the economy.
“High levels of household indebtedness remain a key concern of the financial system with total household credit market debt reaching two trillion dollars by the fourth quarter of 2016,” CMHC said in its latest Mortgage and Consumer Credit Trends report, released Tuesday. “While credit growth has surpassed growth in disposable income for many years, the ratio of debt to disposable income reached 167.2% by the last quarter, a three percentage point increase over 2015.”
The report uses consumer credit data from Equifax to assess the current financial health of Canadian consumers.
It found mortgage credit holders’ credit situation is stable; in Q4 2016 delinquency rates dropped across all mortgage loan values, with loans worth less than $200,000 recording their best delinquency rates in a year.
The average credit rating for mortgage holders improved as well.
Still, CMHC did find some worrying stats.
Mortgage delinquencies for those over the age of 65 are the highest among all age group. It also found credit delinquency rates remained higher for Canadians who do not currently have a mortgage.
However, the Crown Corporation acknowledged there are some safeguards now in place to safeguard against credit issues among mortgage holders.
“While the credit situation of Canadians has generally improved, those with a mortgage have fared better. New financing rules to tighten access to insured mortgage credit and ensure new homebuyers have a sufficient buffer in order to continue servicing their debts in a higher interest rate environment were introduced this quarter,” CMHC said. “These measures, aimed at both high and low ratio insured mortgages, should help insulate households from rising mortgage service costs due to rising interest rates.”
To read the full report, click here.
Last year saw approximately 1.03 million new mortgage loans at a total of about $269 billion, which represents a 9% year-over-year increase.
In light of that mortgage growth, the Crown Corporation remains vigilant about the risk household debt poses to the economy.
“High levels of household indebtedness remain a key concern of the financial system with total household credit market debt reaching two trillion dollars by the fourth quarter of 2016,” CMHC said in its latest Mortgage and Consumer Credit Trends report, released Tuesday. “While credit growth has surpassed growth in disposable income for many years, the ratio of debt to disposable income reached 167.2% by the last quarter, a three percentage point increase over 2015.”
The report uses consumer credit data from Equifax to assess the current financial health of Canadian consumers.
It found mortgage credit holders’ credit situation is stable; in Q4 2016 delinquency rates dropped across all mortgage loan values, with loans worth less than $200,000 recording their best delinquency rates in a year.
The average credit rating for mortgage holders improved as well.
Still, CMHC did find some worrying stats.
Mortgage delinquencies for those over the age of 65 are the highest among all age group. It also found credit delinquency rates remained higher for Canadians who do not currently have a mortgage.
However, the Crown Corporation acknowledged there are some safeguards now in place to safeguard against credit issues among mortgage holders.
“While the credit situation of Canadians has generally improved, those with a mortgage have fared better. New financing rules to tighten access to insured mortgage credit and ensure new homebuyers have a sufficient buffer in order to continue servicing their debts in a higher interest rate environment were introduced this quarter,” CMHC said. “These measures, aimed at both high and low ratio insured mortgages, should help insulate households from rising mortgage service costs due to rising interest rates.”
To read the full report, click here.
