Canada’s largest banks are still navigating increased borrower stress. Canadian Bankers Association (CBA) data shows mortgage arrears have reached a 5 year high in September. Arrears have been climbing aggressively, and are amplified by falling total mortgages. With banks holding ~150,000 fewer mortgages since peak—each delinquent mortgage holds more weight.
Canadian Mortgage Arrears Rate Still Climbing Aggressively From Lows
Canadian Mortgage Arrears Rate: The CBA Mortgage Arrears Rate.
Source: CBA; Better Dwelling.
Canada’s largest banks are seeing a steady uptick in borrowers falling behind. The mortgage arrears rate was 0.24% in September, up 4 basis points (bps) from last year and 10 bps from the record low in June 2022. The level isn’t concerningly high, but resembles normalization to pre-pandemic reality. However, there are some concerning data points that indicate normalization may be a stop on the way to something more concerning.
Canadian Mortgages In Arrears Have Exploded 63% Since 2022
Canadian mortgage arrears: Mortgages reported in arrears (90 or more days past due) at CBA member banks.
Source: CBA; Better Dwelling.
The actual volume of distressed mortgages has been exploding higher in recent months. There were 12,040 mortgages in arrears in September, up 17.8% from last year and 63.2% higher than the June 2022 record low. This was the most since September 2020, and 5.6% higher than 2019. Distress is rising more aggressively than the arrears rate suggests, highlighting the emerging issue that can amplify the problem very abruptly—total mortgages.
Canadian Mortgage Volume Plunge Amplifies Arrears Concerns
Total Mortgage Volume At Canadian CBA Member Banks.
Source: CBA; Better Dwelling.
CBA member banks reported 4.97 million total mortgages in September, up 0.65% (+32.0k mortgages) from a month before. Since credit is seasonal, month-over-month isn’t typically worth analyzing, but this data point may be notable this time next year. It was the first monthly growth observed after 14 months of declines—and it was sharp growth.
It’s unclear what’s behind the sudden acceleration considering mortgage and credit data has been grinding lower. However, the trend is still generally showing a drop—total mortgages were down 1.0% (-49.2k mortgages) from last year and 2.83% (-145.0k) mortgages from peak. The trend is still heading in the same direction—lower. As the denominator gets smaller, this helps to boost the arrears rate while suggesting reduced liquidity potential.
The arrears rate was treated to some artificial softening due to a sudden rise in the monthly total mortgage issuance. However, this was the first monthly shift in well over a year and a single bump doesn’t make a trend. The trend still shows higher mortgage arrears and a climbing rate, and generally declining total mortgages. When the denominator shrinks, each delinquency matters more.
You Might Also Like