Mortgage Delinquencies in Canada Nowhere Near as Low as U.S.

On March 5, the Mortgage Bankers Association announced that mortgage delinquencies continued to rise in the US. The press release said “The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 7.88 percent of all loans outstanding as of the end of the fourth quarter of 2008, up 89 basis points from the third quarter of 2008, and up 206 basis points from one year ago”. The percentages of loans that were 60, 90 days or more past due also set new records in 4Q,2008 compared to 3Q,2008.

How does the mortgage delinquency rate in Canada compare to the U.S. rate of 7.88%?

A review of the data from the Canadian Bankers Association shows that the delinquency rate in Canada is much lower than the U.S. rate. Though the data shown in the below table goes only up to October of 2008, it still provides some interesting insight to analyze mortgage delinquencies in Canada.

Number of Residential Mortgages in Arrears

Month	Total Number of Mortgages	Number of Mortgages in Arrears	% of Arrears to Total Number of Mortgages
2008-01	3,811,089	10,100	0.27%
2008-02	3,809,140	10,376	0.27%
2008-03	3,822,749	10,438	0.27%
2008-04	3,830,155	10,068	0.26%
2008-05	3,842,289	10,250	0.27%
2008-06	3,852,207	10,319	0.27%
2008-07	3,864,025	10,420	0.27%
2008-08	3,871,038	10,866	0.28%
2008-09	3,893,801	11,265	0.29%
2008-10	3,898,269	11,459	0.29%

Source: Canadian Bankers Association

Note:Includes data from BMO (BMO), CIBC (CM), HSBC Bank Canada, National Bank of Canada, RBC Royal Bank (RY), Scotiabank (BNS), TD Canada Trust (TD) and Manulife Bank. Mortgage arrears means delinquencies of 3 months or more.

As seen in the above table, mortgage delinquencies in Canada as of October, 2008 stood at just 0.29%. This is much below the 7.88% figure in the U.S. reported by the Mortgage Bankers Association. While the Canadian rate increased from 0.27% in the beginning of 2008 to 0.29% in October, it is still below 1% of all outstanding mortgages. Data for the last two months of 2008 is not yet available on the site. As the Canadian economy weakens further it will be interesting to see impact on the mortgage delinquency rate in the coming months.

Comments

[Teutonic Kn...:]

Mr. Hunka,

Thank you for this interesting and insightful article. As a former Canadian, I found it informative.

BTW, would there be a typo in the title of the article? Would "...as low..." be "...as high..." instead?

Thank you.
teutonic

Mar 22 09:16 AM

[john s. gordon:]

not surprising, banking in canada is run by more conservative responsible type individuals, as contrasted with the go-go types prevalent on wall st., countrywide, golden west etc.
> jack

Mar 23 10:09 AM

[Allan Frain:]

I agree that Canada's banks are more responsible.

Also, Canada experienced a fall in residential real estate values from 1989 to 1996, hence the "real estate always goes up" mantra could not take hold. Americans benefitted from no such similar lesson.

Mar 23 10:55 AM

[Suziclue:]

What's wrong with American's, why are we so greedy?? Can't we be more like the canadians. They have a better health system, they have better lifestyles (less fat people), a better Canadian Idol! And way better and stable housing. If you doubt that, look at how much home prices have dropped for the americans the past 3 years!!

www.homepricetrend.com

Mar 24 01:38 AM

[CalifNative:]

SuzieClue:
"What's wrong with American's...canadians. They have a better health system"

What's wrong is as a country it's uneducated. On a well documented study of the World's Health Care Systems, Canada placed 58, just under Poland, and close to many third world countries, while the US was rather close to the top. Americans don't even understand that when the Government runs things, everyone suffers.

Mar 24 11:58 AM

[Hans33:]

I'd like to see that data. I suspect you are wrong. This UNICEF study of teenager academic performance shows Canada ranking 4th in the world where as the US is 18th:
archives.cnn.com/2002/...

The following survey shows that Canada has a higher percentage of college grduates than the US and says that Toronto residents hold more university degrees than any other country in the world:
www.topix.com/forum/wo...



On Mar 24 11:58 AM User 382073 wrote:

> SuzieClue:
> "What's wrong with American's...canadians. They have a better health
> system"
>
> What's wrong is as a country it's uneducated. On a well documented
> study of the World's Health Care Systems, Canada placed 58, just
> under Poland, and close to many third world countries, while the
> US was rather close to the top. Americans don't even understand that
> when the Government runs things, everyone suffers.

Mar 24 01:05 PM

[samo:]

You are right...US systems is better....only problem...only 20-40% of Americans have that better system. The rest have it worse, or don't have it at all. There is a flaw in your conclusion based on teh study you are quoting. It's that type of thinking that is causing you to get 'snowed'...


On Mar 24 11:58 AM CalifNative wrote:

> SuzieClue:
> "What's wrong with American's...canadians. They have a better health
> system"
>
> What's wrong is as a country it's uneducated. On a well documented
> study of the World's Health Care Systems, Canada placed 58, just
> under Poland, and close to many third world countries, while the
> US was rather close to the top. Americans don't even understand that
> when the Government runs things, everyone suffers.

Mar 24 02:47 PM

[CUSIP:]

Canada's home prices just started to fall recently and will get crushed worse than the U.S.

Using Canada as an example is like pointing out that the person that jumped from the Empire State Building is still alive after a few seconds so they are OK when in fact it take approximately nine seconds to dig in like Wiley E. Coyote after jumping from the top of the Empire State Building.

Nice strawman argument...it is never different 'here'.

Mar 24 03:56 PM

[scousi:]

Also in Canada, mortgage loans are recourse. You can't just walk away. You are still responsible for any deficiencies.

Also, if you don't put 20% down, you are forced to pay mortgage insurance premiums. This is usually tacked on the principal amount.

Mar 24 10:34 PM