Mortgages In "Severe Delinquency" Have Surged 67% In Ontario

Amidst high cost of living and a rising unemployment rate (now 6.4%), homeowners, especially those in Ontario, are driving mortgage balance delinquency rates, with over 3,000 mortgages in the province in "severe delinquency" at the end of Q2 2024, according to the latest Market Pulse Consumer Credit Trends and Insights Report from Equifax® Canada.

Those 3,000 mortgages amount to a $1.3B balance and represent a 66.8% increase in severe delinquencies compared to Q2 2023, bringing the current mortgage balance delinquency rate in Ontario to 0.16% — the highest it's been since 2014, when the metric clocked in at 0.18%. Even so, nationally, rates remained lower than pre-pandemic levels (0.16% vs. 0.17% in 2019).

“Inflation is stabilizing and interest rates are starting to reduce, which is good news for many consumers,” said Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada. “Unfortunately, rising unemployment has offset some of the positives and is driving increased financial stress.”

In light of rising unemployment, high cost of living, and largely unattainable home prices and mortgages, it's no surprise that the number of young adults living at home longer is growing. In fact, almost one third (29.2%) of Canadian households have an adult children living with parents or grandparents, up from 26.7% a decade ago, reported Equifax. In Ontario, that number jumps to 32.8%.

“The economic conditions we’re seeing today may be leading many young people to stay at home longer,” said Oakes. “With fewer job opportunities, soaring rent prices, high housing prices, and the high cost of living, young Canadians are increasingly relying on the support of their parents and grandparents.”

It's also no surprise, then, that high home prices and interest rates are hitting first-time homebuyers the hardest. In Q2, the number of first-time buyers continued to decline compared to pre-pandemic levels, and those that do buy face loans exceeding $410,000, forcing many to opt for longer amortization terms including ones exceeding 25 years, Equifax reported.

In 2024, high interest rates also took a toll on those renewing their mortgages, with 15% of renewals experiencing a substantial increase of over $300 monthly, almost doubling the 8% of mortgages that experienced the same increases in 2019. And, of course, the figures are even more dramatic in Ontario and BC where the number hit 20%. As a result, many in these provinces have opted to extend their mortgage amortization terms in order to manage higher costs, said the report.

"Homebuyers who secured homes in 2020 and 2021 with low interest rates and high loan amounts, could face challenges,” said Oakes. “Even with recent rate cuts, these individuals may need to prepare for significant increases in monthly payments and extended amortization terms. Those with low renewal affordability and negative equity may find it especially difficult to navigate these changes."

Overall, Equifax described the mortgage market in Q2 2024 as "strained," due to those pesky high interest rates. Still, despite being "well below" typical levels, new mortgage originations grew by 21.3% in Q2 — a notable improvement from the previous year's low numbers. As well, Alberta saw a substantial rise in new mortgages, driven largely by interprovincial migration, that exceeded even pre-pandemic levels. And even though sales dropped in Q2, average mortgage loan amounts grew by 6.1% compared to Q2 2023.