The Latest in Mortgage News: New Data on Financial Distress in Canada
A significant number of Canadian households reported being late on a debt payment or missing it entirely, according to a new report from Statistics Canada.
The 2016 data from the agency’s Survey of Financial Security shows that more than 1-in-10 Canadians (11%) with some form of debt reported skipping or making a late non-mortgage payment.
According to StatsCan, those more likely to miss or skip a debt payment include:
Those aged 55 to 64 years old (8.1% missed payments compared to 3.9% of 24-to-44-year-olds and 4.2% of 45-to-54-year-olds.)
Those in the lowest quintile of income groups (6.8% missed payments compared to 2.1% of those in the highest quintile)
Those living in the Prairies (6.8% missed payments compared to 3.2% of those in Ontario and 3.4% of those in Quebec)
Lone-parent families (9.4% missed payments compared to 2.4% of those with no children and 4% of couples with children)
Debt-to-asset ratio as a measure of financial distress
The report also noted that a high debt-to-asset ratio is a better indicator of a household’s financial distress compared to the commonly reported debt-to-income ratio (which reached a near-record level in Q1 of this year).
“Families with a higher debt-to-asset ratio are more likely to report having experienced a variety of financial problems, like skipping or delaying payments, or using payday loans,” the report reads.
Case in point:
About 16% of families with a debt-to-asset ratio above 50% of their assets missed or delayed a non-mortgage payment
vs. 7% of families with a debt-to-asset ratio of less than 25%
About 1.7% of families in the lowest debt-to-asset category missed or delayed a mortgage payment
vs. about 7% for those with a debt-to-asset ratio above 50%
Overall, 4% of those with a mortgage skipped or delayed a mortgage payment in the year preceding the survey.
But as RateSpy’s Rob McLister noted in a post, “That said, actual mortgage arrears are just 0.25%, meaning only 2.5 out of 1,000 are 90+ days past due on their mortgage. This suggests that some of the folks who skipped a mortgage payment presumably used their lender’s skip-a-payment feature.”
And in other news…
Two-Thirds of Canadians are Concerned About Country’s Housing Market: Poll
The survey was based on a poll of 1,000 Century 21 real estate agents who were asked to gauge the mood of their clients.
Slightly more than 68% said their clients are “somewhat” or “very concerned” about current market conditions (18.1% being very concerned). On the flip side, just 15.6% reported their clients as being “optimistic” or “excited.”
Buyers were found to be significantly more optimistic compared to sellers, with 57.7% of buyers reporting to be excited or calm about prices and taxes and 28.8% being concerned, compared to 38.6% of sellers who reported being excited or calm and 38.7% being concerned.
A slow housing market in the West—particularly Calgary and Edmonton—is clearly taking a toll on the mood of clients. The survey found the Prairies to be the most pessimistic region, where 77% were reported as being somewhat or very concerned.
B.C. Home Sales Forecast to Rise in 2020: BCREA
Residential home sales for 2019 are expected to be down 9% compared to last year, but pent-up demand is expected to lead to a turnaround in 2020, according to the British Columbia Real Estate Association (BCREA).
It forecasts a decline to 71,400 units this year before rising 14% in 2020 to 81,700 units, shy of the 10-year average of 84,800 units.
“The shock to affordability from restrictive mortgage policies, especially the B-20 stress test, will continue to limit housing demand in the province this year,” said BCREA’s chief economist, Cameron Muir. “However, a relatively strong economy and favourable demographics are likely creating pent-up demand in the housing market.”
Like news like this?
Join our CMT Updates list and get the latest news as it happens. Unsubscribe anytime.
Thank you for subscribing. One more step: Please confirm your subscription via the email sent to you.