Mortgage defaults remain low, despite fears

October 29, 2021



Chart courtesy Canadian Bankers Association.


When COVID-19 led to lockdowns and layoffs in 2020, there was widespread concern of a looming spike in mortgage defaults.
Yet, despite a record rise in Canadian mortgage debt and home prices in nearly every city in the country, this expected increase never happened.
A report released October 14, 2021 by the Canadian Bankers Association (CBA) revealed that as of July 31, 2021 there were only 9,157 mortgages in arrears out of total of 4.97 million mortgage holders in Canada.
This amounts to a 0.18 per cent default rate—considered low even by Canadian standards.
A mortgage default is when three consecutive monthly mortgage payments have been missed.
The CBA found the two provinces with the highest average home prices, Ontario and British Columbia, also had the lowest mortgage defaults. In Ontario, just 0.7 per cent of mortgages were underwater as of July 31, while B.C. had the second-lowest default rate at 0.13 per cent.
According to a separate report from the Bank of Canada, also released in October, the total rate of mortgage defaults in Canada is 0.78 per cent. This study included those who had received some form of COVID-19 mortgage relief from a lender. The study found that only 0.5 per cent of those who had qualified for mortgage relief failed to get their mortgage payments back on track as of the third-quarter of 2021.
The Bank of Canada included these key reasons for “the lack of a noticeable increase in payment arrears despite the large economic disruption caused by the pandemic:”
• Employment and economic activity have rebounded strongly from their troughs in spring 2020.
• Policy-makers have provided households with considerable financial support and continue to do so.
• Monetary policy actions (through the Bank of Canada) have pushed short- and longer-term interest rates lower, making credit more affordable for households.