Despite higher interest rates, Canadians still making their mortgage payments compared to their American counterpart

Despite a sharp rise in interest rates, Canadians are overwhelmingly in good standing with their mortgage payments.

 

As of May, roughly 9,500 residential mortgages were in arrears, meaning payments were overdue by three or more months, according to figures published this month by the Canadian Bankers Association. That amounts to just 0.19 per cent of more than five million total mortgages. The delinquency rate has risen slightly from historics lows in 2022.

 

On its website, the CBA notes that mortgage arrears are a lagging indicator, and indeed, many Canadian borrowers have yet to feel the full brunt of higher interest rates. In May, the Bank of Canada said in a report that around half of all outstanding mortgages had yet to renew at higher rates.

The same report also showed that mortgage delinquencies were higher – and rising more quickly – at small and medium-sized banks; the CBA tracks mortgage data from mostly large lenders, such as the Big Five banks.

 

Still, the Bank of Canada has started its process of cutting interest rates, which should offer some relief to borrowers. And while unemployment is rising, it is disproportionately affecting young people and recent immigrants, who tend to rent their homes.

“Payment arrears are driven primarily by employment conditions and major changes in life circumstance that can cause an unexpected loss to a significant portion of household income,” the CBA says on its website.

 

Delinquency rates run much higher in the United States. In the second quarter, 1.01 per cent of mortgage loans had payments that were 90-plus days overdue, based on seasonally adjusted figures the Mortgage Bankers Association published on Thursday.

 

 

 

 

This article was first reported by The Globe and Mail