Private lenders suffering from much higher delinquency rates

Delinquencies in mortgage investment entities are nearly at 2%

Private lenders suffering from much higher delinquency rates

Delinquency rates among leading private lenders are several times higher than average, according to a Better Dwelling analysis of CMHC data covering Q3 2018.

While overall delinquency rates are low nationwide, the figures are considerably higher in non-traditional providers. The most notable of these are in mortgage investment entities (MIEs), which together have a delinquency rate of 1.93% – approximately eight times larger than that seen among traditional banks (0.24%).

Mortgage finance companies (MFCs) posted 0.25% delinquency, while credit unions exhibited the lowest rate at 0.17%.

“Rates and regional issues help give context to these numbers,” Better Dwelling explained. “Riskier borrowers with higher rates are more likely to become delinquent. Smaller, more rural mortgages held by credit unions are more manageable.”

Consumers borrowing from MFCs held an average mortgage size of $258,140 during Q3 2018, which was the highest balance of any segment. Banks had an average mortgage of $220,650 in that same time frame, while MIEs had an average balance of $194,760. Credit Unions had the lowest average balance at just $150,995.

“Rates and regional operation likely impact how these numbers are distributed. For instance, MFCs have the highest balances, but also the lowest rates. Credit Unions are less prominent in major cities, and hold fewer big city mortgages.”

In terms of market share, banks continued to hold the largest portion so far at 75% as of 2018. Credit Unions represented the next largest share at 14%, while MFCs held 6% and MIEs held around 1% of the market.