Canadians piled on mortgage debt even as COVID-19 forced the country into lockdowns, and Canada Mortgage and Housing Corporation (CHMC) worries many will eventually struggle to keep up with payments.
The national housing agency says total outstanding mortgage debt accelerated at the beginning of 2020 and into the first months of COVID-19 lockdowns in April and May. CMHC says the jump followed a relatively stable period in 2019.
''We observed a surge in outstanding residential mortgage credit in the first five months of 2020.
“This mortgage credit acceleration is a result of an increase in newly extended mortgages, given residential property sales were up late last year and early this year, and a record number of homeowners deferring their mortgage payments from impacts of pandemic-related economic shutdowns,” said Tania Bourassa-Ochoa, senior specialist, housing research at CHMC.
CMHC says six-month deferrals, offered in response to the pandemic, have resulted in 760,000 deferred or skipped mortgage payments across chartered banks. It estimates $1 billion per month has been deferred.
As the deferral period ends, CMHC says there is a higher risk of mortgage delinquencies in the third and fourth quarters.
It also says a string of interest rate cuts by the Bank of Canada has sparked an increased interest in variable rate mortgages.
Uninsured mortgages are getting more popular too and 63 per cent of mortgages from chartered banks were uninsured.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.