Soaring Ontario real estate prices have sent mortgage defaults in the city lower and lower. Numbers from Equifax Canada show that the number of people falling behind on mortgage payments have now hit a record low. This sounds like great news on the surface, but a look at how quickly this happened is likely a bad indicator for the market.
Ontario Mortgage Delinquencies Fall To A Low
Mortgage delinquencies have fallen to a low in Ontario, setting a new record. Only 0.15% of mortgages stood delinquent at the end of the fourth quarter of 2017, a 32% decline from the same time last year. The total number of delinquent mortgages is 47% lower than the third quarter of 2012, the furthest municipal number available. Yeah, I know what you’re thinking… “oh…that sounds…uh…yup.” It’s confusing if you don’t get excited at the sound of debt numbers, so let’s give this some context.
Ontario Mortgage Delinquencies Vs. BC and Canada
We recently observed that delinquent mortgages are rapidly declining across the province of BC. The province had 0.21% of mortgages delinquent at the end of 2016, a 50% decline over the same period as Ontario. To contrast, Canada has a rate of 0.34% mortgages delinquent, an 8.8% decline over the same period. The rate at which delinquencies declined in Ontario and BC is more than four times faster than across the country.
Mortgage Delinquencies, Incomes, and Real Estate Bubbles
Like we’ve said before, declining delinquencies are great for banks, it’s unclear how great it is for actual housing consumers. When the rate of delinquencies deviates quickly from the baseline, one of two things are happening: Incomes are rapidly accelerating, or the liquidity of homes is starting to get frothy.