Extremely high: Total mortgage balance ‘severe delinquency’ without payment exceeds $1 billion, first occurrence in Ontario

Ontarians are under extreme financial strain as more mortgages come up for renewal at higher interest rates while unemployment creeps up, according to a new report by credit reporting agency Equifax.

 

In Ontario, the total mortgage balance reaching “severe delinquency” — 90 days or more without payment — exceeded $1 billion for the first time in the first quarter of 2024. That’s double the level recorded before the pandemic, the report stated.

 

“A shocking number,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. “And it’s not a case of it’s increasing or flattening — it’s still on an upward trajectory in terms of missed payments. That really is where the concern is coming from.”

 

The trend reveals that consumers, particularly those in highly priced housing markets, are still dealing with the crushing effects of inflation and higher-for-longer interest rates.

 

Of all mortgages renewing in the first quarter, around nine per cent saw monthly payments soar by more than $500. And it’s affecting everyone, not just mortgage holders.

 

“If you’re renting, rental prices are still going up as well,” added Oakes, “so, it’s kind of a double whammy, really.”

All this is happening as the unemployment rate in Ontario rose to 6.7 per cent in May 2024 from 6.2 per cent in January, according to Statistics Canada, as corporations are also dealing with elevated interest rates.

 

Last week, the Bank of Canada cut its policy interest rate by 25 basis points for the first time in more than four years, but the move is too small to bring significant relief to homeowners just yet, mortgage brokers said.

 

Mortgage delinquency rates have spiked in both Toronto and Vancouver — the cities with the greatest demand for housing in the country. Delinquencies for mortgages over 90 days past due rose in Toronto to 0.14 per cent in Q1 2024 from 0.09 per cent in Q1 2020, and in Vancouver the number rose to 0.14 per cent from 0.11 per cent during the same period.

 

Equifax estimated that about 34,000 consumers missed a payment on their mortgage in the quarter, an increase of roughly 23 per cent from a year ago.

 

And while, on a national scale, mortgage delinquency rates remained lower than pre-pandemic levels, provinces like Alberta, Saskatchewan and Manitoba still recorded some of the highest non-mortgage debt and delinquency rates in the quarter, the report stated.

Overall, Canadians are acquiring more of all kinds of debt. Consumer debt rose to $2.46 trillion, a 3.5 per cent increase from the previous year. But many are unable to pay it off with more than 1.26 million consumers — about three per cent of all Canadians — missing at least one credit payment, the highest number since 2020.

 

The types of debts facing the highest risk of missed payment include auto loans and lines of credit, according to Equifax. Generally, when consumers experience a credit crunch, the last product to see delinquencies are mortgages, said Oakes.

 

“We are really seeing consumers trying to adapt to the situation more than we have done in the past.”

 

Equifax found that consumers are checking their credit scores more frequently, shopping around for better rates, switching from the Big Five banks to other lenders and, if they’re in Ontario, considering moving to a province with a lower cost of living.

 

 

 

 

This article was first reported by The Star