And as expected, the arrears rates are starting to rise the loss rates are starting to move up.” The severity of the losses will largely be determined by the duration of the economic lockdown along with the steepness of the recession. “There’s early tentative credit card data coming in from credit card trust portfolios. The rate of mortgage arrears floats with the unemployment rate - a figure that saw a significant jump in March to 7.8 per cent from 5.6 per cent.īen Rabidoux, president at North Cove Advisors, explained that the data already show some foreboding figures. “So I think the issue around leverage isn’t going to go away, in fact, I think it will become more acute.” This is the risk that will confront Canadian households during the recession and recovery, according to Craig Alexander, the partner and chief economist at Deloitte: “One of the great legacies of the current crisis is that after the pandemic has passed, we’re going to have more indebted households,” he explained. These challenges are exacerbated by burgeoning Canadian debt loads (with a household debt to personal disposable income ratio of 166.5 per cent by Q3 2019) that have long gone unaddressed. The current financial environment does raise many red flags: the country lost over one million jobs last month and Canadians are finding it more challenging to keep up with bills. Obversely, these past few years had Canadians fuelling these debt loads even further, and it has prompted concerns that the country would face its own debt reckoning during COVID-19 with a surge in mortgage arrears and delinquencies. It’s not going to be anywhere near that,” explained Susan Hosterman, the senior director of North American RMBS and covered bonds, citing historically low delinquency rates in Canada, “So I don’t think we’ll see those levels with just how pro-active the banks are being with working with the borrowers.” “I definitely feel like we’re not going to see the delinquency rates that we saw in the U.S.

Rising unemployment and high debt is expected to boost mortgage loan delinquencies in Canada, though experts say it won’t play out like the U.S.

Covid mortgage defaults