Mortgage arrears in Canada remain low even as rates rise, with most borrowers managing payments well
Canadians are largely maintaining their mortgage payments despite a significant rise in interest rates, as reported by the Globe and Mail.
Data from the Canadian Bankers Association (CBA) shows that as of May, approximately 9,500 residential mortgages were in arrears, with payments overdue by three or more months.
This figure represents just 0.19 percent of the more than five million total mortgages in Canada, reflecting a slight increase from the historic lows of 2022.
The CBA emphasizes that mortgage arrears are a lagging indicator, and many Canadian borrowers have not yet faced the full impact of higher interest rates. According to a May report from the Bank of Canada, around half of all outstanding mortgages have not yet been renewed at the higher rates.
Additionally, the report indicates that mortgage delinquencies are more prevalent and rising faster at small and medium-sized banks. The CBA's data primarily reflects mortgage information from large lenders, including the Big Five banks.
As the Bank of Canada begins to cut interest rates, some relief may be on the horizon for borrowers. Although unemployment is increasing, it is primarily affecting younger individuals and recent immigrants, who are more likely to rent than own their homes.
The CBA notes on its website that payment arrears are typically driven by employment conditions and significant life changes that result in a substantial loss of household income.
In comparison, mortgage delinquency rates are notably higher in the United States. In the second quarter, 1.01 percent of mortgage loans were overdue by 90 days or more, according to seasonally adjusted data from the Mortgage Bankers Association released on Thursday.
