January 17, 2024

Weekly EconMinute—Percentage of mortgages in arrears

In this week’s EconMinute, we’re talking about the percentage of mortgages in arrears.

Owning a home is a major goal for many, and making timely mortgage payments is an essential part of keeping that home.

When a payment is overdue (by three months or more), a mortgage is considered “in arrears.” Individuals tend to avoid this at all costs—due to the risk of foreclosure. However, Canada has seen the fastest increase in interest rates in its history, and the impact on monthly mortgage payments could put many in a bad spot.

So, are Albertans falling behind on their mortgages? To answer this question, we examine the number of mortgages in arrears relative to the total number of residential mortgages in the province.

Here’s what we found:

  • As of the latest data (which, unfortunately, is September), this indicator does not show any cause for concern.
  • Canada-wide, only about 0.16% of mortgages are in arrears—a significant decrease from the 10-year average of 0.23%.
  • Likewise, Alberta’s rate of mortgages in arears is 0.33%, substantially below its 10-year average of 0.42%.
  • That said, Alberta holds the second-highest percentage of mortgages in arrears across Canada while Saskatchewan leads with 0.58%.
  • This geographic disparity is not new. The likely culprit is the volatility of the oil and gas industry, and thus the risk of jobs loss, which can leave mortgage payments unexpectedly punishing.

Though missed payments remain low relative to historical trends, it’s too early to know if this will hold. First, as of September, many households had yet to renew their mortgages, and were still locked in at previous rates (i.e., before interest rates started rising). Second, even among those who saw a more immediate increase, many may make it work for some time, potentially missing other payments first. In fact, the Bank of Canada estimates interest rate increases take anywhere from 18-24 months to fully take hold in the economy. All this to say, this is an indicator we will be closely watching in 2024.

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