Canadian Mortgage Delinquencies Ease Amid Bank Of Canada Rate Cuts

Recent data indicates that Canadian mortgage delinquencies are decreasing, coinciding with the Bank of Canada's recent interest rate cuts. Equifax reports that the annual increase in delinquent mortgage holders was 9.5% in the third quarter of 2024, a decline from 11.7% in the previous quarter.

Over 1.3 million consumers missed a credit payment last quarter, marking a 10.6% rise from the same period last year. However, the rate of missed payments has begun to slow, with notable improvements among mortgage holders. This positive trend is partly attributed to the Bank of Canada's recent interest rate reductions.

The central bank has implemented multiple rate cuts since June, lowering the policy rate to 3.25% as of December 11, 2024. These reductions aim to stimulate economic growth amid weaker-than-expected performance and a softening labor market.

Despite these improvements, delinquencies across all credit products remain higher than pre-pandemic levels. Non-mortgage delinquency rates reached 1.43% in the third quarter of 2024, up from 1.2% in the same quarter of 2023. However, variable-rate products like lines of credit and home equity lines of credit have shown slight improvements in delinquency rates.

The rise in mortgage delinquencies is not uniform across Canada. Provinces such as Ontario and British Columbia, where housing affordability remains a significant challenge, are the primary contributors to the overall increase in delinquency rates.

As the Bank of Canada continues to adjust its monetary policy, the impact on mortgage delinquencies and overall consumer credit health will be closely monitored. The central bank's next interest rate announcement is scheduled for early 2025, with economists divided on the anticipated rate adjustments.