Canada's Condominium Magazine
Although Canada Mortgage and Housing Corporation remains concerned about the record high household debt in Canada, they report “positive trends in mortgage and consumer credit.”
In their Third Quarter 2017 Report Mortgage and Consumer Credit Trends, they highlighted four key points:
- The credit situation for Canadians “has generally improved, those with a mortgage have performed better.”
- Delinquency rates are improving in Canada, and mortgage holders were 80% likely to have a “very good” or “excellent” credit score.
- Mortgages continue to grow in volume, with 2016 seeing a 9 percent increase over 2016, “representing about $269 billion.”
- People without a mortgage were more likely to have poor credit score.
They also called out “average credit scores of mortgage holders improved int he fourth quarter, in addition to a decrease in their likelihood of bankruptcy.”
Interestingly, though, “consumers without a mortgage continued to follow a declining trend in their average credit scores beginning in 2015, as well as an increasing likelihood of bankruptcy.” Clearly, there is a correlation between having a mortgage and an improved credit score. Mortgage delinquencies, although lower overall, were highest among people over the age of 65.
“Household debt is a key concern for Canada’s housing and finance systems. Using data collected by Equifax, CMHC is able to provide reliable, impartial and timely information on credit trends and developments in Canada.” — Maxim Armstrong, Senior Statistical Researcher, Canada Mortgage and Housing Corporation
Mortgage and consumer credit risks
CMHC indicated that both “share of mortgage loans and the share of mortgage debt in arrears dropped in the last quarter of 2016” and concluded the “mortgage market is not under additional stress” and again highlighted that the risk of poor credit rating or bankruptcy increased among those without a mortgage.
They also concluded:
“Mortgage arrears at various degrees of severity in the fourth quarter of 2016 were all in decline compared to a year earlier. The larger drop in the 60-90 DPD7 category bodes well for the next quarters as fewer loans are showing early signs of difficulty.”
“Among loans that are not paid on time, we see a concentration in loans that are reaching the two most severe categories of 120 DPD and written off.”
- “Credit card, line of credit and auto loan delinquency rates increased marginally for both consumers with and without a mortgage, however, rates remain higher for consumers without a mortgage.”
80% of people with positive credit scores (very good to excellent) were mortgage holders, and were deemed “low probability of defaulting on their debt service payments” — not just their mortgage but all debt.
According to Equifax, the risk score for people without a mortgage dropped, while those with a mortgage improved.
Size of mortgages
66.3% of all outstanding consumer debt is in mortgages, a very slight uptick from the previous year at 66.1%. Just over 28 percent of consumers carry a mortgage loan, virtually unchanged from previous year. 66% of mortgage debt (outstanding) carries balances of between $100,000 and $400,000). The average size of a new mortgage was $226,540 in the fourth quarter 2016, which is a 6.7 percent increase. However, mortgages with balances over 600,000 are increasing:
The average monthly obligations for all consumers (as of last reported period Q4 2016) shows: