The pandemic has exacerbated residential mortgage debt

The COVID-19 crisis has increased residential mortgage debt in the country, according to a study by the Canada Mortgage and Housing Corporation (CMHC) released Thursday.

This increase during the first six months of the year is explained in particular by the postponements of mortgage payments granted by Canadian financial institutions due to the pandemic. These postponements could last up to six months.

A total of 760,000 mortgage payments were postponed or skipped, or 16% of residential mortgages issued by chartered banks. The amount of these deferred reimbursements is estimated by CMHC at more than $ 1 billion per month.

“We have seen a sharp increase in home mortgage credit outstanding in the first five months of 2020,” said CMHC senior housing research specialist Tania Bourassa-Ochoa.

“This acceleration in mortgage credit growth is driven by the increase in newly extended mortgages, as residential property sales increased at the end of last year and early this year, and by the record number of homeowners who have postponed their mortgage payments due to the impact of the pandemic shutdown, ”she noted.

There is therefore “risk of a significant increase in delinquent mortgages” in the second half of this year at the expiration of postponements, according to the federal body.

Thanks in part to deferrals, mortgages past due at least 90 days remained at “low levels for all types of mortgage lenders”.

CMHC also expects early or accelerated mortgage repayments to decrease due to the COVID-19 crisis, which is expected to increase debt levels.

She pointed out that all chartered banks are affected by deferrals, an extraordinary measure granted to stabilize markets to avoid a cascade of default. This phenomenon also affects other non-bank financial institutions that provide residential loans.

“About 10% of mortgage borrowers have requested deferral of their mortgage payments through Mortgage Investment Corporations (MIFs) and other Mortgage Investment Entities (MIFs),” CMHC said.


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