OTTAWA: Record-low interest rates and strong housing market activity driven by a pandemicfuelled demand for more space, have propelled residential mortgage debt growth during the first half of 2021 up to levels not seen in a decade, according to Canada Mortgage and Housing Corporation (CMHC)’s annual Residential Mortgage Industry Report release today.
As of June, the total outstanding residential mortgage debt stands at $1.73 T. The report provides in-depth view of the residential mortgage market in Canada from mortgage origination to funding, covering insured and uninsured mortgages, and encompasses activity from all mortgage lender types.
It is based on data available at the end of the second quarter of 2021. Gighlights from the report:
Mortgage lending trends
• Canadian mortgage debt service burden as a share of disposable income continued to build up in Q1 2021, driven by growth in scheduled principal payments, reflecting in part the larger mortgages resulting from the rapidly increasing housing prices in 2020.
• Uninsured new mortgage credit witnessed a 20% growth in volume, taking over an increasing share of the residential mortgage market. The most noteworthy increase was in the issuance of uninsured mortgages for purchases of property, which more than doubled the amount originated in the same quarter in 2020.
As the economy progressively opened up and deferral agreements expired, the vast majority of borrowers that benefitted from deferral arrangements had resumed their payments as scheduled. At the end of the first quarter of 2021, close to 30,000 mortgage loans (2%) held by non-bank lenders were still in deferral for a total value of $6.9 billion. Mortgages in arrears reach a 30-year low.
As most borrowers who benefitted from a mortgage deferral were able to resume regular payments, enhanced consumer savings and the growth in disposable income have contributed to the ability of Canadians to make the mortgage monthly payments on time.
Mortgage rate trends
• The large discount between fixed and variable rates drove more borrowers to opt for variable-rate mortgages. Over 40% of new mortgage balances issued in Q2 2021 have variable rates.
• New mortgage holders continued opting for longer-term mortgages to take advantage of historically low interest rates.
Mortgage insurance trends
• The Big 6 banks provided a larger share of newly extended mortgages in 2020 (68%) than in 2019 (67%).
• The remaining one fifth of new mortgages in 2020 were handed out by non-bank lenders.
Mortgage lender type trends
• In 2019, Canada’s big six banks maintained their strong foothold in the housing finance market, with a 67% market share of newly extended mortgages.
• Mortgage Finance Compa nies (MFCs) hold 20% of the insured mortgage space and credit unions stand at 12%. Mortgage investment corporations (MICs) and other types of investment entities (MIEs) maintained more caution in their lending activity Mortgage delinquencies of 90 days+ continued their downward trend for all lender types. Credit unions recorded the lowest rate of mortgages in arrears at 0.13%.
MIEs continue to record the highest mortgage arrears rates with 0.88%. However, MIEs was the segment where the arrears rate recorded the largest drop.
Tania Bourassa-Ochoa, CMHC, Senior Specialist, Housing Research, said: “We are also seeing that mortgages in arrears have reached a 30-year low. Many borrowers benefitted from a mortgage deferral program offered by CMHC and lending institutions and were able to resume regular payments. As well, more consumer savings and the growth in disposable income have contributed to the ability of Canadians to make the payments on time.”
