The number of mortgages in arrears have reached their highest level since 2013 in Alberta, as residents are struggling to keep up with payments in the province’s lagging economy.
The rate of Alberta mortgages in arrears climbed for 10 months before reaching 0.49% in February, according to new data from the Canadian Bankers Association (CBA), which looked at residential loans from BMO, RBC, Scotiabank, TD Canada Trust, the National Bank of Canada and more. The CBA deems a mortgage to be “in arrears” when payments are overdue by three or more months.
That’s more than double the rate of the rest of the country, where arrears have been declining and reached 0.24% at last count. Recent reports have noted that most Canadians are keeping up with debt payments right now, even as consumer debt levels continue to rise across the country. In May, the national unemployment rate was 5.4% — the lowest level since 1976, according to Statistics Canada.
But Alberta remains an exception as residents continue to struggle with the slowdown in the province’s oil and gas sector. The unemployment rate hit 7.2% in October 2018, up from 6.3% in May of the same year.
Freida Richer, a licensed insolvency trustee in Edmonton, told the CBC that the numbers reflect her clients’ experiences.
“Although we've been on this road of economic recovery now for almost two years, I can tell you that from my discussions with a lot of hardworking Albertans, there was a continued sentiment that their households are still struggling and they're simply not able to recover as quickly as they had thought or hoped,” Richer said.
Job loss, poor money management and family breakups are the main reasons why people struggle with their mortgages, she added.
The CBA said that the rate of mortgages in arrears is typically viewed by economists as a “lagging indicator” that an economy is facing challenges. Lagging indicators show the effects of an economic trend, such as a recession. They don’t tend to register on an industry or statistics until after the economic trend is already in motion (e.g. a recession hits, people lose their jobs and then they start defaulting on their mortgages).