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July 24, 2015

Mortgage Arrears Nudged Downward Again in 2014

Mortgage arrears in Canada, defined as the percentage of residential mortgages that are delinquent for three months or more, fell slightly again on an annual average basis in 2014, to 0.29%, from 0.31% in 2013.1 However, this may be poised to change, as there was a marginal increase in the arrears rate in 2015 Q1.

Canada and United States Mortgage Arrears, 2004 – 20142,3,4

Sources: Canadian Bankers Association and U.S. Mortgage Bankers Association

  Canada: all residential mortgages (%)
Canada: average 2000 – 2014 (%)
U.S.: prime fixed-rate mortgages (%)
U.S.: average since 2000 – 2014 (%)
2004 0.29 0.34 0.25 0.84
2005 0.26 0.34 0.29 0.84
2006 0.25 0.34 0.31 0.84
2007 0.25 0.34 0.33 0.84
2008 0.28 0.34 0.74 0.84
2009 0.41 0.34 2.10 0.84
2010 0.43 0.34 2.39 0.84
2011 0.41 0.34 1.62 0.84
2012 0.34 0.34 1.40 0.84
2013 0.31 0.34 1.19 0.84
2014 0.29 0.34 1.12 0.84
2015 Q1 0.29 0.34 1.01 0.84

Regionally, arrears rates were much higher in the Atlantic provinces (0.59%) and Saskatchewan (0.40%); while the lowest arrears rate was observed in Ontario (0.17%) in 2015 Q1.1

In comparison, the average arrears rate for prime fixed-rate mortgages in the United States (the most comparable mortgages to the overall Canadian mortgage market), was 1.01% in 2015 Q1.5 While mortgage arrears in the U.S. have recovered significantly from their peak during the financial crisis, they have not yet reached pre-crisis levels, when they were similar to mortgage arrears rates in Canada.

While the Canadian arrears rate is useful for observing overall trends, it has limitations, since it is an average of all residential mortgages from 10 financial institutions.6 From a public policy perspective, it would be useful to have more detailed data from all lenders, to better understand differences in arrears rates between types of mortgage lenders (e.g. big vs. small) and types of mortgages (e.g. insured vs. uninsured; prime vs. non-prime).  For example, data from the United States indicates differences in arrears by loan types: 8.53% for sub-prime loans, compared to 1.12% for prime-fixed rate loans in 2014.

For more on Canadian and U.S. mortgage arrears, see the data table “Canadian and U.S. Residential Mortgage Arrears”

1 Canadian Bankers Association.

2 Canadian and U.S. mortgage arrears rates are non-seasonally adjusted and calculated based on the total number of loans serviced (not on their dollar value).

3 The Canadian mortgage arrears rate reflects the ratio of loans with installments past due by 90 days or more. The annual arrears rate is calculated by averaging 12 monthly arrears data in a calendar year (average of 3 months in 2014 Q1), which are collected by the Canadian Bankers Association from 10 major Canadian banks including BMO, CIBC, HSBC, National, RBC, Scotiabank, TD Canada Trust, Canadian Western, Manulife (as of April 2004) and Laurentian (as of October 2010).

4 The U.S. arrears rate reflects the ratio of one- to four-unit residential property loans with installments past due by 90 days or more. The annual arrears rate is calculated by averaging four quarterly arrears data in a calendar year. The data are collected by the U.S. Mortgage Bankers Association National Delinquency Survey from approximately 120 U.S. mortgage lenders, including mortgage banks, commercial banks, thrifts, savings and loan associations, sub servicers and life insurance companies. The "prime" mortgage criteria used in these data is based on survey participants' reporting of what they consider to be their prime mortgage servicing portfolios (including prime fixed-rate mortgages and prime adjustable-rate mortgages), and such criteria may vary among lenders.

5 U.S. Mortgage Bankers Association.

6 These 10 financial institutions are estimated to currently account for approximately three-quarters of outstanding mortgage credit in Canada.



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