Houses are seen on Squamish Nation land in North Vancouver, on Tuesday, February 22, 2022. Canada's housing agency says risks remain in the mortgage market as over a million come up for renewal next year while a growing number of new mortgages are being issued by alternative lenders. The Canadian Press.
Canada’s housing market remains stable overall, yet risks are mounting, especially in the mortgage sector, according to Canada Mortgage and Housing Corporation’s (CMHC) latest report. Although housing has held strong despite high interest rates and a slow economy, CMHC warns that challenges remain for borrowers facing upcoming mortgage renewals, as well as for those relying on alternative lenders.
In the second quarter of 2024, mortgages over 90 days delinquent reached 0.19 percent of the market—an increase from the 0.14 percent low in 2022 but still below pre-pandemic rates of 0.28 percent. The rise in missed payments is particularly notable among borrowers with alternative lenders, who often charge higher interest rates due to the increased risk associated with clients who may have lower credit scores or less stable incomes.
Among mortgage investment corporations (MICs), which are alternative lenders catering to higher-risk borrowers, delinquency rates exceeded pre-pandemic levels, climbing to 1.15 percent in the first quarter from 0.88 percent a year earlier. Delinquency rates were especially high for single-family home loans, with the top 25 MICs seeing 5 percent of mortgages over 60 days past due in the second quarter, up from 1.7 percent in late 2022. CMHC’s report also noted that alternative lenders are now taking a larger share of new mortgages, expanding their risk profiles with higher loan-to-value ratios and fewer mortgages in secure first-lien positions.
Assets under management for the top 25 MICs rose by nearly 5 percent in the second quarter, while the broader mortgage market grew by 3.5 percent. CMHC raised concerns about this growth, as 1.2 million mortgages are set to renew in 2025, with 85 percent of these originally signed when interest rates were 1 percent or lower. While the Bank of Canada has already reduced rates to 3.75 percent in 2024, these renewals still represent a significant increase in borrowing costs compared to recent years.
Delinquencies in other areas, like auto loans and credit cards, are also on the rise, signaling broader financial struggles among Canadians. CMHC highlighted that high household debt levels and the challenge of mortgage renewals at elevated rates pose ongoing economic risks. The agency expects mortgage delinquencies to continue increasing into 2025, underscoring the need for borrowers to prepare for a shifting financial landscape.
