Deferred or skipped mortgage payments are due soon are you prepared?
In a report on Thursday, the Canada Mortgage And Housing Corporation looked at the state of the mortgage market in Canada. This year’s numbers, as is the case with just about everything else, was viewed through the prism of COVID-19.
One crucial aspect was identified; more than three-quarters of a million Canadian homeowners have either deferred or skipped a mortgage payment since the COVID-19 pandemic began, to the tune of about $1 billion a month.
This underlines just how significant the pandemic’s impact on Canadian mortgages has been. In March and April, Canada’s big banks announced sweeping mortgage deferral programs that would allow borrowers to skip some payments on their mortgages. While the move gave borrowers some breathing room at a time when incomes were falling, those payments have to be paid back in full.
Since the pandemic began, roughly 760,000 Canadians applied for some sort of mortgage deferral from a chartered bank. It is a well-known fact that Canada’s big banks control about two-thirds of the mortgage market. The CMHC calculated that on average, Canadians deferred about $1 billion in mortgage debt every month since the beginning of the pandemic. Most of those deferral programs were for six months at most, which means for some, these payments are due soon. With this in mind, there continues to be a risk that a significant increase in mortgage delinquency will be observed in the third or fourth quarter, as these deferral agreements come to an end.
The arrangements that homeowners have made with banks are a big reason why the default rate has remained at just 0.28%. It is projected that as those deferral programs expire this fall, that number could rise. The Bank of Canada expects the mortgage arrears rate could spike to twice as high.
It was also noted that non-bank lenders also offered deferral programs, which are set to expire soon. Considering that rates from lenders such as Mortgage Investment Corporations tend to be much higher to begin with, there could be even more defaults than the CMHC is expecting.
This deferred debt means that in the aggregate, fewer Canadians are likely to get ahead of their payments this year. Last year, CMHC reported that two-thirds of Canadian homeowners planned to make an extra scheduled payment on their mortgages in 2020. Existing mortgages are getting more payments tacked on to them, and there’s been a surge in new mortgage debt. The number of new loans grew by 14% in the first quarter of 2020 compared to 2019.
Matrix Mortgage Global is aware of the record number of homeowners, who have deferred their mortgage payments due to the impact of pandemic-related economic shutdowns. We are excited to work with you, because we know we can offer you a variety of mortgage solutions to meet your specific financial needs. Visit us at https://www.matrixmortgageglobal.ca/to discover the secret to your future mortgage success