Principal payments also slid down, while interest payments had a modest uptick
The amount Canadians paid towards mortgages during the second quarter noticeably declined by 4.74% from Q1 and by 3.32% annually, Statistics Canada data showed.
Overall Q2 payments amounted to $90.27 billion, around $4.49 billion lower than the quarter prior. A significant driver of this was the widespread implementation of payment deferral options among banks, according to real estate information portal Better Dwelling.
“The quarter-over-quarter drop was so large, it actually eliminated all of the gains,” Better Dwelling said in its analysis of the StatsCan numbers.
Figures from the Canada Mortgage and Housing Corporation indicated that approximately $1 billion in mortgage payments were deferred every month during the COVID-19 pandemic, and that the average monthly payment in Canada was at $1,333 this year.
Principal payments also dropped by 13.02% quarterly and 9% annually, ending up at $35.92 billion in Q2. Interest payments ticked up by 1.67% quarterly and 0.85% annually, for a total of $54.3 billion.
Despite this trend, the largest Canadian banks remained confident that most borrowers will be able to resume their payments soon.
“We’re not looking at seeing a big spike in foreclosures,” said Rod Bolger, CFO at Royal Bank of Canada. “We expect that these mortgages, as they come off the deferral programs, to remain the homes of our clients.”
Much of RBC’s borrowers who deferred their payments have average loan-to-value ratios in the mid-50s and average FICO scores higher than 750, Bloomberg reported.
Meanwhile, the Bank of Nova Scotia is expecting most of its remaining balances to be resolved before year-end.
“We are seeing signs for optimism as household spending continues to return to more normal levels and economic output continues to regain lost ground,” said Brian Porter, CEO at Scotiabank.