Mortgage deferrals fears prove unfounded, so far

February 8, 2021

A projected explosion in mortgage defaults following deferrals earlier this year as the pandemic bit into household finances has failed to materialize, with active deferrals in Canadian banks representing a mere 0.8 per cent of their residential mortgage portfolios as of December 2020.
Data from the Canadian Bankers Association showed that this amounted to only 37,582 active mortgage deferrals across the country.
For perspective, deferrals throughout 2020 accounted for nearly 17 per cent of banks’ residential loan books, totalling around 800,000 deferred mortgages.
“If you look at the number of mortgage deferrals that are left in the system, it’s a small fraction of what it was,” said Benjamin Tal, deputy chief economist at CIBC.
This runs counter to many warnings that deferrals would lead to mortgage defaults or a rush of refinancing as homeowners attempted to keep afloat. That scenario didn’t happen, at least not yet.
However, a recent TransUnion survey found that despite the return to regular work by millions of Canadians, almost half of all households have seen their incomes decline during the pandemic, with nearly 40 per cent of them expressing anxiety about paying their bills—some with good reason.
Canadian household debt as a percentage of disposable income increased to 170 per cent in the third quarter of last year, compared to 163 per cent in the second quarter of 2020, according to Statistics Canada.