Canadian homeowners have increased their additional mortgage payments during the pandemic, taking advantage of savings built up during the lockdowns to pay down their home loans.
A total of $34-billion of additional or unscheduled mortgage payments were made last year, compared with $31-billion in 2019, according to a new report from Canada Mortgage and Housing Corp.
“We were seeing very clearly that households were saving more,” said Tania Bourassa-Ochoa, a senior housing researcher with CMHC.
Previously, unscheduled mortgage payments fell from 2017 through to 2019, according to the housing agency’s Residential Mortgage Industry Report.
More homeowners were able to make additional mortgage payments as pandemic restrictions slashed all types of spending, including vacations, entertainment and commuting costs.
The country’s household savings rate – the share of disposable income left after spending – hit 27.8 per cent in the second quarter of last year, the period of the most severe lockdowns. That rate has since declined to 12.7 per cent in the fourth quarter, according to Statistics Canada. That is still high historically and prepandemic, it is a level not seen since the early 1990s.
The savings rate is higher for higher income brackets, according to Statscan. Many homeowners are the ones who kept their jobs and were able to work from home, while the pandemic slammed lower-paid workers in services industries such as retail and accommodation.
“Many high-income earners have stable income, and they are spending much less money this year. They are even saving money on gasoline since they don’t need to drive to work,” said Elan Weintraub, mortgage broker with Mortgageoutlet.ca.
Any fallout from mortgage deferrals granted during the health crisis has been minimal. Although banks provided temporary loan-payment relief for 17 per cent of their residential loan portfolio, the vast majority have resumed payments.
“A year ago, there was a lot of worries and uncertainty,” Ms. Bourassa-Ochoa said.
The so-called mortgage deferral cliff of homeowners unable to restart monthly loan payments never materialized.
Mortgage arrears – when a mortgage holder has not made a payment for at least 90 days – have been declining for all types of lenders. For banks, the rate was 0.23 per cent as of January, according to the Canadian Bankers Association. (The mortgage deferrals were not included in the overall arrears rate.)
For mortgage investment corporations – alternative lenders who provide home loans at higher interest rates – the arrears rate eased to 1.79 per cent in the third quarter from 1.98 per cent in the second quarter, according to CMHC. The arrears rate for credit unions and other non-bank lenders such as trusts eased incrementally to 0.15 per cent and 0.26 per cent, respectively.
With mortgage rates near record lows, Canadians borrowed at a pace not seen since the Great Recession in 2008-09. The CMHC report showed new mortgages were up across all types of lenders.
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