Homebuying

Canadians are getting worse at paying their mortgages on time

By: Jessica Mach on March 5, 2019

As Canadians continue to struggle with high debt loads, mortgage payments have started to take a hit despite being the debt type Canadians have historically been most concerned about — and good at — paying on time.

In the last quarter of 2018, 90-day mortgage delinquencies in Canada increased by 1.5% to 0.18% year-over-year, according to a new report released by credit bureau Equifax Canada on Tuesday. The 90-day rate measures the number of times homeowners have failed to make their mortgage payments within 90 days of the due date.

The regions that saw the biggest growth in mortgage delinquency were, surprisingly, not the most expensive ones to own homes in: mortgage delinquencies grew the most in Manitoba (19%), Saskatchewan (9%) and Quebec (4%) — all of which boast relatively affordable housing. Meanwhile, Ontario, which has one of the least affordable housing housing markets in the country, saw delinquencies grow by only 2%.

Ninety-day delinquencies for non-mortgage debt, which includes debts that aren’t secured by real estate — like auto, student and credit card loans — also grew toward the end of 2018, up 0.4% to 1.07%.

Demographically speaking, seniors have struggled the most with debt payments in general: delinquency rates for people aged 65 and over increased for three consecutive quarters, and went up 7.2% in the last quarter of 2018 to 0.96%.

The rise in delinquencies immediately follows two quarters where consumer bankruptcies saw “significant increases,” according to Equifax.

“...The worm is turning in the Canadian credit market,” said Bill Johnston, vice president of data and analytics at Equifax Canada, in a statement. “Bankruptcies are up 15 per cent in the last half of 2018 and the small increase in delinquency rates mask some underlying weakness.

“Rising delinquency is likely to become the norm in 2019,” he added.

Growing delinquency rates call into question whether consumers will be able to handle higher interest rates as the Bank of Canada prepares to make its next rate announcement on Wednesday morning.

In the past few months, several financial organizations have released reports that paint a landscape of rising insolvency rates, growing debt loads and consumers who are unable to keep up with debt payments.

Equifax data corroborate these reports. According to the credit bureau, credit card balances grew 2.4% to an average of $3,904 in the fourth quarter of 2018, partly because more people were neglecting to pay off their balances in full each month.

Bank loans grew even more, rising 6.5% year-over-year to an average of $27,667.

 

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