The share of Canadians missing payments on their mortgages is down compared to last year despite the impact of higher interest rates, according to the Canada Mortgage and Housing Corp.
CMHC chief executive Romy Bowers testified at the House of Commons’ standing committee on human resources Monday, where she gave members of Parliament a look inside the Crown corporation’s mortgage books.
Bowers, who’s leaving her post at the end of the year to join the International Monetary Fund, said there are about 6,000 households on its books that are at the “greatest exposure” in the face of higher interest rates. That represents roughly two per cent of all mortgages insured by the CMHC, she said.
Bowers also said she thinks the risk of a spike in defaults is low despite higher interest rates from the Bank of Canada raising the cost of borrowing for homeowners renewing their mortgages.
The central bank’s benchmark interest rate has risen to highs not seen in more than two decades, which means most Canadian households will be paying more when they renew the terms of their mortgage in the coming months.
But despite the rise in rates, Canadians appear to be doing a better job paying down their mortgages today than they were a year ago.
The proportion of CMHC-insured mortgages in arrears or with missed payments is down to 0.25 per cent, Bowers said Monday, compared to roughly 0.5 per cent in December 2022.
She credited a tight labour market boosting Canadians’ incomes and still-rising home valuations in some parts of the country driving up homeowners’ equity for improving the overall financial picture of households.
“People have more equity and the employment picture, for homeowners at least, is very strong,” she told MPs.
“Our arrears are at historic lows, and as long as the employment picture is strong, we do not anticipate defaults.”
The Bank of Canada held its benchmark interest rate at 5.0 per cent last week, marking the second consecutive pause in what has been one of the fastest rate-hike cycles in its history.
The central bank also released a new Monetary Policy Report last week, which suggested that the greatest stress among Canadian borrowers is so far concentrated in non-mortgage debt such as auto loans.