Toronto and Vancouver See Mortgage Delinquencies Rise To Highest Level Since 2016

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Canada’s mortgage delinquencies are flat, but that story is much more interesting by region. Canada Mortgage and Housing Corporation (CMHC) data shows mortgage delinquencies are flat in Q3 2020. It’s a little different looking at the biggest real estate markets though. In Toronto and Vancouver, delinquencies are still rising to multi-year highs. Montreal is performing […]

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Canada’s mortgage delinquencies are flat, but that story is much more interesting by region. Canada Mortgage and Housing Corporation (CMHC) data shows mortgage delinquencies are flat in Q3 2020. It’s a little different looking at the biggest real estate markets though. In Toronto and Vancouver, delinquencies are still rising to multi-year highs. Montreal is performing as expected, with delinquency rates falling, likely helped by payment deferrals.

Mortgage Delinquencies 

First, a quick note on mortgage delinquencies and how to read them. Obviously higher levels are worse, but some regions will always have higher levels. Montreal is higher than Toronto, at almost any point in recent history. It’s not because it’s doing worse, but because of regional differences. This means cross-comparison of cities isn’t particularly useful.

Instead, like most money indicators, the velocity of change is more important. If Montreal is falling from long-term averages, that’s considered a market positive. If Toronto’s indicators are rising from lows, things are getting worse. It doesn’t matter if Montreal is higher than Toronto, or vice versa. What seems normal in Montreal, would be disastrous in Toronto. The odds of both markets approaching a similar level is slim to none.

Canada’s Mortgage Delinquencies Are Flat

Canada’s mortgage delinquency rate is trending flat at the national level. The rate was 0.3% in Q3, the same as the previous quarter. This was also flat from the same quarter last year. Not a lot happening when looked at in aggregate. Breaking down major real estate markets though, we see a lot more movement.

Canadian Mortgage Delinquency Rate

The quarterly rate of mortgages that are delinquent across Canada.

Source: CMHC, Equifax, Better Dwelling.

Toronto Mortgage Delinquencies Hit Highest Level Since 2016

Toronto’s mortgage delinquency rate is climbing, and is at the highest level in years. The rate hit 0.12% in Q3, up 9.1% from the previous quarter. The quarterly increase is the same compared to last year. This is the highest delinquency rate Toronto has seen since 2016. A big difference between then and now though, is the trend was moving in the other direction.

Toronto Mortgage Delinquency Rate

The quarterly rate of mortgages that are delinquent across Greater Toronto.

Source: CMHC, Equifax, Better Dwelling.

Vancouver Mortgage Delinquencies Hit Highest Level Since 2016

Vancouver’s mortgage delinquency rate is climbing, and is also at a multi-year high for the region. The rate reached 0.16% in Q3, up 6.7% from the previous quarter. Compared to the same quarter last year, the rate is 23.1% higher. The sharp annual increase puts delinquencies at a rate not seen since 2016.  

Vancouver Mortgage Delinquency Rate

The quarterly rate of mortgages that are delinquent across Greater Vancouver.

Source: CMHC, Equifax, Better Dwelling.

Montreal Mortgage Delinquencies Fall And Are At A 5 Year Low

Montreal’s mortgage delinquency rate is falling, and is now at the lowest level in at least half a decade. The rate fell to 0.25% in Q3, flat from the previous quarter. The rate is down 10.7% from the same quarter last year. This is the lowest rate in at least the past 5 years, but likely goes back much further.

Montreal Mortgage Delinquency Rate

The quarterly rate of mortgages that are delinquent across Greater Montreal.

Source: CMHC, Equifax, Better Dwelling.

Rising delinquencies are odd to see at this moment, considering market activity and policy measures. Rising delinquencies are usually a result of constrained liquidity, a.k.a. a lack of buyers. In this market, Toronto and Vancouver are seeing price increases and record sales. It’s odd to see anyone fall delinquent in the current narrative.

Further, the government rolled out a number of policy measures to prevent delinquencies. The vast majority of people that requested mortgage payment deferrals, received them. This should have made the rate lower than usual. Other segments of credit subject to similar circumstances are coming in unusually low. Montreal’s delinquency rate is more typical of what was expected, considering the odds of failure were sharply reduced.

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