Delinquency rates continue to decline and have reached their lowest levels since 2009
Although Canadian household debt is rising at an accelerated pace, this is largely driven by mortgage borrowing, which accounted for 80% of Canadian household credit accumulation over the last year, according to a report published Wednesday by CIBC World Markets Inc. in Toronto.
The research notes that the increase in mortgage debt is mainly a result of a rise in the average mortgage size and not a hike in home-buying activity. The rise is most pronounced in Toronto and Vancouver where the appreciating cost of housing is outpacing the rest of the country, which is already experiencing a soft landing.
The biggest challenge for the Toronto and Vancouver housing markets is the continued asymmetrical price appreciation, where the prices of more expensive properties are rising faster than those of less expensive properties, said Benjamin Tal, deputy chief economist at CIBC World Markets, in a statement.
“Our research suggests this may have major implications for home owners looking to move up who now find they are priced out of this segment of the housing market,” adds Tal, who authored the report. “What’s more is that the increase in the average house price masks a widening gap between the surging prices of detached properties and relatively muted increases in the price of condo units.”
Even with the jump in overall household debt levels, delinquency rates continue to decline and have reached their lowest levels since 2009, states the report.
“Even as Canadians take on higher debt levels, it’s clear the vast majority are paying their bills on time,” says Tal. “Mortgage delinquencies continue to decline, falling below 0.3% with Ontario experiencing the lowest level at 0.15%, even as Toronto remains one of the priciest housing markets in the country. The same is true in Alberta, where the energy sector’s volatile labour market has not yet affected households ability to repay debt.”