The tight labour market and rising home valuations had something to do with that trend
The number of Canadians who have missed their mortgage payments has dropped compared with last year even with higher interest rates, according to the national housing agency.
Romy Bowers, Canada Mortgage and Housing Corporation’s (CMHC’s) chief executive, testified at the House of Commons’ standing committee on human resources on Monday, showing members of Parliament the findings of the Crown corporation’s mortgage books.
Bowers said that there were around 6,000 households on its books that were at the “greatest exposure” when it comes to higher interest rates. The number comprised 2% of all the mortgages that were insured by CMHC.
The chief executive also said that there was a low risk of a spike in defaults occurring even with the raised cost of borrowing for homeowners who were renewing their mortgages.
Number of missed mortgage payments falls
The Bank of Canada’s benchmark rate has spiked during the past 18 months, a fact that’s caused a dilemma for many Canadian households now grappling with the prospect of payment costs surging upon their mortgage renewal.
However, CMHC found that the number of its insured mortgages in arrears or those that missed their payments was most recently at 0.25%. Last December 2022, this figure totalled 0.5%.
Bowers said this was because of a tight labour market that boosted the incomes of Canadians along with the rising home valuations in some parts of Canada that drove up the equity of homeowners, both of which improved households’ financial situations.
“People have more equity and the employment picture, for homeowners at least, is very strong. Our arrears are at historic lows, and as long as the employment picture is strong, we do not anticipate defaults,” said Bowers.
Last week, the central bank held its benchmark interest rate at 5.0% the second consecutive pause in one of the fastest rate-hike cycles in its history. It also recently released a new Monetary Policy Report which suggested that Canadian borrowers’ greatest stress was currently fixated on non-mortgage debt like auto loans.
