New home purchases are the main driver of mortgage debt

What you need to know about mortgage growth, mortgage arrears and alternative lenders in the third quarter of 2021. Get all the details in our winter 2022 Residential Mortgage Industry Report Dashboard.

Mortgage growth continued to increase

Mortgage growth continued to increase in the third quarter of 2021. It went up 10%, bringing total residential mortgage debt in Canada to $1.77 trillion. Since the beginning of the pandemic, chartered banks (+11%) continue to heavily outpace non-banks (+4%) in terms of year-over-year growth of their mortgage portfolio.

Figure 1: Mortgage growth by chartered banks largely outpaces non-banks' new mortgage activity
	Chartered banks	Non-banks
2013	6%	3%
2014	6%	2%
2015	4%	8%
2016	6%	7%
2017	6%	8%
2018	5%	3%
2019	3%	4%
2020	5%	3%
2021	9%	2%

Purchase of new property is the main driver of mortgage debt for chartered banks, especially in the uninsured space. In the third quarter of 2021, close to $58 billion worth of residential mortgages were extended. This is an increase of 60% compared to the same period in 2020 and almost double what was extended in the same period of 2019.

Refinancing also contributed to the increase in mortgage debt, (+16%) year-over-year. This is due to mortgage borrowers capitalizing on the low interest rate environment and added equity due to house price increase.

Figure 2: Uninsured purchases of property drive mortgage growth in the third quarter of 2021, chartered banks
	2019 Q3	2020 Q3	2021 Q3
Purchase of property	12,448,810	17,303,354	13,601,447
Same lender refinancing	1,091,634	717,907	863,923
Same lender renewals	23,600,521	27,903,232	13,120,822
Other mortgages	930,411	1,070,632	554,481
Purchase of property	31,372,663	36,089,126	57,792,538
Same lender refinancing	20,771,061	20,751,681	24,268,137
Same lender renewals	33,947,496	35,714,775	21,550,273
Other mortgages	7,773,697	7,304,802	9,604,913

A larger share of uninsured mortgages was originated with higher total debt service ratios. Among these mortgages, more than a quarter of uninsured mortgages had a ratio over 40% compared to 6% of insured mortgages.

Moreover, the share of uninsured new mortgages with a ratio of 40% or less was on a downtrend since the second half of 2020. This decreased further in 2021, resulting in more leveraged borrowers.

Figure 3: Share of uninsured new mortgages with a TDS ratio of 40% or less continues to shrink at chartered banks
	> 60% Uninsured	> 55% to ≤ 60% Uninsured	> 50% to ≤ 55% Uninsured	> 45% to ≤ 50% Uninsured	> 40% to ≤ 45% Uninsured	> 35% to ≤ 40% Uninsured	> 30% to ≤ 35% Uninsured	≤ 30% Uninsured
2021 Q3	8%	2%	3%	13%	28%	20%	12%	14%
2021 Q2	8%	1%	2%	11%	29%	21%	12%	15%
2021 Q1	8%	2%	2%	10%	28%	21%	13%	16%
2020 Q4	7%	1%	2%	10%	28%	21%	13%	16%
2020 Q3	7%	1%	2%	9%	28%	22%	13%	17%
2020 Q2	7%	1%	2%	9%	27%	22%	14%	18%
2020 Q1	8%	2%	3%	11%	25%	23%	14%	16%
2019 Q4	7%	2%	2%	10%	28%	22%	13%	16%

Mortgages in arrears continued to drop in the first half of 2021 for all mortgage lenders:

0.18% for chartered banks
0.12% for credit unions
0.86% for mortgage investment entities

Factors contributing to the ability of Canadians to make the mortgage monthly payments on time included:

High housing prices coupled with liquid housing markets, making it easier to sell the property rapidly.
Greater consumer savings and the growth in disposable income.

Figure 4: Mortgages in arrears (delinquent for 90 days or more) continued downward trend across all lender types
	Chartered banks	Credit unions	Other non-bank lenders (MFCs, trusts, insurance companies)	MIEs
2020 Q2	0.26%	0.18%	0.29%	1.05%
2020 Q3	0.25%	0.16%	0.29%	1.02%
2020 Q4	0.23%	0.15%	0.27%	0.97%
2021 Q1	0.20%	0.13%	0.25%	0.88%
2021 Q2	0.18%	0.12%	0.20%	0.86%

Alternative lenders slightly picked up mortgage lending activity in the second quarter of 2021. This comes after a significant slowdown in the first year of the pandemic, as uncertainty rose and investors increasingly requested redemptions. This recent growth was likely stimulated by:

higher demand in the context of rising housing prices
relatively low interest rates
slight regulatory changes

During the second quarter of 2021, the higher share of first mortgages and lower loan-to-value on newly originated mortgages decreased the risk of their portfolio. In addition, geographical distribution slightly shifted as Québec’s share increased from 3.7% to 5.3%.

Insights into mortgage investment corporations indicate a decrease in their risk profile
	Q2 2020	Q3 2020	Q4 2020	Q1 2021	Q2 2021
Average lending rate for single-family	9.3%	9.2%	8.9%	8.9%	8.8%
Average lending rate for multi-family	8.3%	8.3%	8.2%	8.2%	8.2%
Average share of first mortgages	75.7%	76.8%	78.4%	81.3%	81.4%
Average loan-to-value (LTV) ratio	56.7%	55.9%	58.0%	58.6%	57.9%
Debt to capital	14.4%	15.6%	17.9%	17.4%	16.8%
Delinquencies of 60 days or more	4.0%	4.1%	3.55%	2.53%	2.13%
Foreclosures	3.8%	3.8%	3.88%	3.18%	2.60%

Insights into mortgage investment corporations indicate a decrease in their risk profile
(Geographical distribution)
Geographical distribution	Q2 2020	Q3 2020	Q4 2020	Q1 2021	Q2 2021
British Columbia	36.2%	37.6%	36.5%	36.4%	36.0%
Alberta	8.3%	7.1%	7.6%	8.1%	8.1%
Ontario	48.3%	47.8%	47.7%	48.7%	49.2%
Quebec	2.1%	2.9%	3.7%	3.8%	5.3%
Others	4.6%	4.2%	4.2%	3.0%	1.4%

Sources: Mortgage Investment Corporations (MIC) Survey, Fundamentals Research Corp, second quarter of 2021

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New home purchases are the main driver of mortgage debt

Mortgage growth continued to increase

Figure 1: Mortgage growth by chartered banks largely outpaces non-banks' new mortgage activity

Figure 2: Uninsured purchases of property drive mortgage growth

Figure 3: Share of new uninsured mortgages based on total debt service ratios

Figure 4: Mortgages in arrears continued downward trend across all lender types

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Mortgage growth continued to increase

Figure 1: Mortgage growth by chartered banks largely outpaces non-banks' new mortgage activity

Figure 2: Uninsured purchases of property drive mortgage growth

Figure 3: Share of new uninsured mortgages based on total debt service ratios

Figure 4: Mortgages in arrears continued downward trend across all lender types

Related links

Was this page relevant to your needs?

Discover related content using the tags below: