Despite Uncertainty, Canadians Are Keeping Up With Mortgage Payments
You might have heard some sensationalist news stories over the past year about Canadian homeowners over-borrowing. With the employment rate so low, and mortgage debt so high, how could Canadians possibly keep up with their payments? Headlines spewed dire warnings that once payment deferrals expired, borrowers would default in droves.
Except that isn’t what happened at all.
The Bank of Canada just released a report stating that only 0.78% of homeowners are behind on their mortgage payments. Yes, this is slightly higher than pre-pandemic levels. But it’s nowhere near the cataclysmic event prophesied by the press. Plus, this number is gradually falling and is expected to level out in the near future. It’s now been three months since most payment deferrals have come to an end, and the outcome is clear: Canadian homeowners are keeping up with their payments.
Homeowners Are Better At Paying Down Debt
What’s even more interesting about the report is that homeowners appear to be better at paying their debts than renters. Pundits and economists who preached the “wait and see” game out of caution were completely misguided. Renting doesn’t appear to provide any added security against over-borrowing.
In fact, it’s the opposite. For all forms of debt including lines of credit, credit card debt, and auto loans, far more renters were late on their payments than homeowners. One could even argue that being a homeowner during the pandemic was less risky than being a renter.
The Bottom Line
Take the headlines with a grain of salt. News sources tend to favour doom and gloom points of view because they sell more papers. Yes, mortgage debt is at a record high. Yes, these historically low rates will eventually rise slightly (as historically low rates do). That doesn’t mean that millions will default on their loans, or that a housing meltdown is imminent.
There’s a lot more nuance that the news doesn’t tell you. Instead of putting all of your stock into CBC news, trust a mortgage broker to tell you the real story. They’re unbiased experts that are more than happy to take the time to offer you advice.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; firstname.lastname@example.org
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