Despite rising interest rates, most Canadians continue to pay their mortgages consistently and on time, according to recent data from the Canadian Bankers Association (CBA).

As of May 2024, approximately 9,500 residential mortgages in Canada were in arrears, with payments overdue by three or more months. This number accounts for just 0.19% of the over five million total mortgages in the country, reflecting a slight increase from the historically low rates of 2022. The CBA emphasized that over 99% of Canadian mortgage holders are in good standing, highlighting the resilience and responsibility of borrowers even during economic challenges.

For investors, this low arrears rate indicates a stable mortgage market, which is crucial for ensuring consistent returns, particularly for those invested in mortgage-backed securities or Mortgage Investment Corporations (MICs). The strong payment discipline of Canadian borrowers suggests that the underlying assets in investors’ portfolios are being well-maintained, reducing the risk of defaults.

The CBA report also pointed out that while most Canadians have managed to keep their mortgage payments current, delinquencies are rising faster among small and medium-sized banks. However, the data also includes information from major lenders, such as the Big Five banks, offering a comprehensive view of the market.

Regionally, Saskatchewan had the highest rate of overdue mortgage payments, with 0.56% of homeowners in arrears, followed by Alberta at 0.31%. Investors can use this regional data to manage risk by diversifying their portfolios or focusing on more stable areas.

Additionally, mortgage arrears serve as a lagging economic indicator, often reflecting past events that impact household income, such as changes in employment or significant life circumstances. By monitoring these trends, investors can gain valuable insights into potential market shifts, enabling them to adjust their strategies proactively.

This blog was inspired by and based on the article "Canadians consistent in paying their mortgages despite rates spike" from Canadian Mortgage Professionals.