Mortgage delinquencies climb as renewals loom

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Hairline cracks are showing in a mortgage market that has held up remarkably well through a dizzying climb in interest rates and the economic slump that followed.

The Canada Mortgage and Housing Corp.‘s fall report out yesterday said mortgage delinquencies — though still well below pre-pandemic levels — are rising and likely will continue to climb next year when more than a million borrowers face renewals.

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“High household debt and renewals at higher rates remain concerns for the Canadian economy,” said the report.

The CMHC said 1.2 million fixed-rate mortgages are up for renewal in 2025 and 980,000 in 2026 and most of those borrowers will face higher interest rates.

Eighty-five per cent of fixed-rate mortgages coming due in 2025 were taken out when the Bank of Canada interest rate was at or below one per cent.

“Therefore, at least 1.05 million mortgage consumers face a renewal in 2025 at significantly higher interest rates,” it said.

Canadians’ budgets have been hit hard by the higher cost of living and rising borrowing costs, said CMHC. “In this context, the already elevated high household debt creates considerable vulnerability.”

The nation’s mortgage delinquency rate rose to 0.19 per cent in the second quarter. That’s below 0.28 per cent seen before the pandemic, but there are signs that it will climb further in the year to come.

The delinquency rate for auto loans has risen significantly to 2.42 per cent, after a year and a half of comparative stability, said the report.

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Delinquencies on credit card and lines of credit are also up 1.70 per cent and 0.84 per cent, respectively.

“Credit card and auto delinquencies can be leading indicators of mortgage delinquency rates, so these patterns suggest that mortgage delinquency will continue to increase into 2025,” it said.

There are also worrying signs in the alternative lending market, which tends to take on riskier loans. After four quarters of slower growth, assets under management in the top 25 mortgage investment corporations was up 4.9 per cent in the second quarter from the year before, while the overall residential mortgage market grew by 3.5 per cent.

CMHC says the risk profile of these lenders also increased as delinquencies and foreclosures rose.

Delinquencies of 60 days or more in the single-family sector rose from 1.7 per cent at the end of 2022 to 5 per cent, and foreclosures rose from 1.3 per cent to 3.5 per cent.

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It’s voting day in America and they are saying the race for the White House has never been tighter. For the “election junkies” out there, Scotiabank’s Derek Holt put together this chart that shows when polls open and when results will become available by individual state.

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The states to watch are Arizona, Georgia, Michigan, Nevada, North Carolina, Pennsylvania and Wisconsin — swing states that experts believe could be won by Kamala Harris or Donald Trump.

The earliest results will start coming at 6 p.m. ET but “settle in for a lonnnnngg night,” said Holt.

In a close race, the outcome might not be known even the next day. Results in the 2020 election, between Trump and Joe Biden, were not declared until the Saturday after the Tuesday vote. Biden won.

In the 2020 contest between George W Bush and Al Gore, the outcome wasn’t known until Dec. 12 after a dispute over the results in Florida. Bush won.

“The closeness of the race suggests it will go right down to the wire including full counting of overseas ballots,” said Holt.

• United States presidential election
• Today’s Data: Canada international merchandise trade, U.S. trade balance
• Earnings: Restaurant Brands International Inc., TransAlta Corp., Thomson Reuters Corp, Colliers International Group, IA Financial Corp, Marathon Petroleum Corp., Yum! Brands Inc.

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The largest six stocks on the S&P 500, all of which happen to be tech firms, now encompass 30 per cent of the index. What could go wrong? Plenty, warns investing pro Martin Pelletier.

The good news is that the cost of hedging during these euphoric times is inexpensive. Find out more about his strategies.

Hard earned truths

In an ongoing series about what the next generation needs to know to build wealth, we offer hard earned truth #5: One stock can ruin your returns. Whether you own a few high flyers that can crash unexpectedly, or you miss out on big winners, a small number of stocks can drive a big part of market gains or losses.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his mortgage rate page for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s YouTube channel for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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