A Quarter of Canadians Struggling to Pay Their Mortgages: CMHC

People walk past homes for sale in Oakville, Ont., in this file photo. The IMF says CMHC mortgage insurance exposes the government to financial system risks and might distort the market as a whole in favour of mortgages over more productive uses of capital. (The Canadian Press/Nathan Denette)

Nearly a quarter of Canadian mortgage holders are struggling to make payments on their homes amid cost-of-living woes and rising interest rates, according to a report from the Canada Mortgage and Housing Corporation (CMHC).

The 2023 CMHC Mortgage Consumer Survey says that in addition to 24 percent of borrowers buckling under the weight of rising monthly payments, only 55 percent believe their homes will increase in value—down from 84 percent a year ago.

The Bank of Canada (BoC)’s policy rate increases have made conditions especially arduous for younger borrowers, says the report, which was first covered by Blacklock’s Reporter.

“The current economic context and rise of interest rates has had a significant negative impact on many consumers’ financial situation,” said the report.

“A significant proportion of mortgage consumers are struggling to make ends meet and fulfill their debt obligations, especially those under 35. This context is also affecting respondents’ general mood.”

Observations were based on a Léger Marketing survey of 4,014 mortgage holders, which included both first-time borrowers and homeowners renewing loans at new rates.

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According to the survey, while 70 percent of respondents say they possess the best mortgage for their needs, that figure declined from 86 percent in 2022. Last year, 84 percent said they were comfortable with their mortgage debt levels, while only 66 percent responded in kind this year.

The proportion of respondents who say they are confident that they can maintain their mortgage payments decreased from 90 percent in 2022 to 78 percent in 2023.

Confidence in homeownership as a sound long-term investment fell from 91 percent in 2022 to 81 percent this year.

According to a separate CMHC report released in May, mortgages comprise roughly three-quarters of all Canadian consumer debt. Furthermore, the report said that reducing household indebtedness hinges on housing prices becoming affordable.

Household indebtedness is also growing in lockstep with the BoC’s rising overnight lending rate, which presently sits at five percent after surging 475 basis points since the beginning of 2022.

According to an Equifax report in June, non-mortgage debt typically decreases at the beginning of the year as consumers curtail spending following the holiday season. However, that hasn’t been the case this year, says Rebecca Oakes, vice president of Advanced Analytics at Equifax Canada.

“The higher cost of living and the influx of new consumers entering the credit market have driven credit card balances to rise by 14.5 percent compared to Q1 2022,” Ms. Oakes said in the report.