More Mortgage Defaults in First Quarter Than All of 2022: Housing Agency

A person walks past multiple for-sale and sold real estate signs in Mississauga, Ont., on Wednesday, May 24, 2023. People renewing their mortgages or looking to buy a home are faced with a very different decision than they might have been just a few years ago, experts said, as rapid interest-rate increases have made fixed-rate mortgages with shorter terms more popular while variable-rate mortgage holders feel the pinch. THE CANADIAN PRESS/Nathan Denette

There were more mortgage defaults in the first quarter of 2023 alone than in all of 2022, government data indicates.

There were 3,081 mortgage arrears—which are counted as being at least 90 days past due—between Jan. 1 and March 31 of this year compared to 2,920 the whole of last year, says information from the Canada Mortgage Housing Corporation (CMHC) filed in an Inquiry of Ministry on Sept. 18.

The information request was made on June 20 by NDP MP Jenny Kwan of East Vancouver, who asked how many insured mortgages defaulted since 2017, what the value of arrears were, how many times CMHC repaid banks on borrowers’ behalves, and how much it cost the Crown corporation. Ms. Kwan also asked if the frequency of defaults rose or fell relative to the central bank’s interest rate increases.

Of the mortgage defaults, CMHC only had to repay banks on 253 mortgages in the first quarter of the year, compared with 1,210 in all of 2022. The total amount of mortgage defaults was $36,472,813.80 in the first quarter, falling just shy of the $37,991,411.30 in all of last year.

Alberta had 987 defaults in the first quarter, surpassing the 962 mortgage arrears in 2022, followed by 518 in Quebec during the first three months of the year compared with 459 last year.

There were 361 arrears in Ontario during the January to March period, and 310 all of last year. Saskatchewan, where the population is over 1 million, had 377 arrears in the first quarter, but that falls short of the 411 in all of last year.

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The Bank of Canada (BoC) has raised its overnight lending rate 10 times, or by 475 basis points, since March 2022 to bring it to 5 percent, while the Consumer Price Index increased to 4 percent in August.

Consequently, the mortgage market in Canada looks bleak for a number of borrowers. Renewal rates have increased to the 6.5 to 7 percent range, according to mortgage professionals who spoke to The Epoch Times.

“You’ve got a bigger shock factor happening,” Pekoe Mortgages owner Daniel Johanis said. “The second thing is people were paying a lot more money for their homes just a couple of years ago than they were in 2018.”

Ron Butler, owner of Butler Mortgage in Toronto, noted that a growing number of Canadian households are spending at least half of their monthly net income on mortgage payments.

But Mr. Butler doesn’t believe the growing number of buyers on the precipice will disrupt the mortgage market.

Still, the BoC says the average payment increase in 2024 will be 14 to 25 percent higher than it was before the central bank began its aggressive quantitative tightening regime in early 2022. Borrowers who were on variable-rate mortgages have already seen their payments surge by 49 percent.

Borrowers with fixed monthly payments on their variable rate mortgages will see increases of 44 percent by 2026 as they’re due for renewal. Many of these borrowers are believed to have only been making interest rather than principal payments.

In the summer of 2020, about 32 percent of mortgages had amortizations longer than 25 years, but as of last quarter that figure grew to 46 percent.