Canada’s largest mortgage lenders are in an unusually long-lasting rut. Canadian Bankers Association (CBA) data shows its members are seeing more mortgages fall into arrears in November. The arrears rate is now moving at one of the fastest paces ever recorded, rising from record lows to a 3-year high in a matter of months. At the same time, the bad luck for lenders keeps piling up—these same lenders have seen a rare contraction in total mortgages held, falling to a 3-year low despite massive borrowing stimulus.
Canadian Banks Saw Mortgages In Arrears Rise 22%
Canadian mortgage borrowers are increasingly falling behind on their mortgage payments. The number of mortgages in arrears climbed 22% to 10,480 in November, the most held by CBA members since March 2021. When isolated, the volume isn’t particularly concerning but the speed at which this shift occurred is. In just over two years, the volume surged 44% from the record low.
That might be concerning as a person but it won’t be to banks, at least for now. Since mortgage risk for the lender’s portfolio is based on a rate, those falling into arrears can be mitigated by simply growing the mortgage book. As long as more new mortgages are being written, it’s simply expressed as the cost of doing business.
Canadians Are Falling Behind On Mortgage Payments
The rate of mortgages in arrears held by large, federally regulated financial institutions in Canada.
Source: CBA; Better Dwelling.
The arrears rate remains relatively low, but even though it’s a small share—it’s clear the tides are turning. Annual growth came in at 4 basis points (bps) to push the arrears rate to 0.21% in November. The rate is up 7 bps since falling to a record low, which is a 50% increase over the two year span. Once again, the last time it was this high was back in Spring 2021—however this time, it’s heading in the wrong direction.
Canadian Banks Haven’t Held Fewer Mortgages Since 2021
A rare occurrence is also happening—Canadian banks have fewer mortgages. The CBA reported a total of 5.01 million mortgages held by its reporting members in November, shedding about 36.5k since last year. Annual growth has been negative since April 2023, which is an extremely rare occurrence in Canada. Prior to that, going all the way back to the mid-90s shows only 7 months in 2018/2019 where annual growth declined. These lenders are now holding the fewest mortgages since 2021.
Once again, by itself these numbers wouldn’t present much of a concern. They aren’t seeing historical highs, but they are climbing at one of the fastest paces in history. The fact this is occurring while policymakers are throwing enormous resources at the problem is also of concern. Compounding the issue is the shrinking mortgage market, despite the country going all out on trying to stimulate borrowing.