While the phrase ‘mortgage delinquency’ may incite feelings of doom, gloom, and dread, a just-released report from Equifax comes through with a (relatively) positive swing. The multinational consumer credit reporting agency said on Tuesday that the annual increase in delinquent Canadian mortgage holders came in at 9.5% in the third quarter of the year, down from 11.7%, year over year, in the quarter prior.
Though more than 1.3 million consumers missed a credit payment last quarter (up 10.6% from 12 months ago), the pace of missed payments has “begun to slow,” Equifax said in a press release. The improvement in missed payments was “more visible for mortgage holders” over other types of credit products, and this was, in part, due to recent interest rate cuts from the Bank of Canada.
READ: Mortgages In "Severe Delinquency" Have Surged 67% In Ontario
With Equifax citing BoC cuts as one of the main reasons behind improvement in missed credit payments in the third quarter, it stands to reason that there’s more reprieve on the horizon. The central bank has cut its policy rate four times since June, bringing it down to 3.75% with a 50-basis-point cut last month.
The next interest rate announcement, and final one of the year, is scheduled for December 11, and economists seem to be in agreement that the meeting will culminate in a cut. That said, there is debate on what that cut will be after the latest Consumer Price Index print from Statistics Canada clocked in at 2% year over year in October (after coming in at 1.6% in September).
With inflation coming in “hotter than expected,” economists with TD are calling for a cut of 25 bps next month. The flare-up in CPI hasn’t swayed economists with RBC, however, who are sticking to their base-case forecast and continue to call for a 50-bps cut to the benchmark rate in a few weeks time.
Coming back to Tuesday’s report from Equifax, the agency said that delinquencies in the third quarter on all credit products were “consistently higher” than 2019 levels. “Non-mortgage 90+ balance delinquency rates reached 1.43% in Q3 2024, up from 1.2% in Q3 2023,” Equifax said. “However, variable-rate products, such as lines of credit and home equity lines of credit (HELOCs), saw improvements with 90+ day balance level delinquency lowering from 1.8% and 0.32%, respectively, last quarter, to 1.77% and 0.3% in Q3 2024.”
“Overall mortgage balance delinquency rates rose above pre-pandemic levels, however, this increase was not seen in all provinces,” the agency said. “Provinces like Ontario and British Columbia where affordability remains a significant challenge were the key driver behind the rising overall levels.”
