Mortgage delinquencies rising in city’s residential market

Mortgage delinquencies across Canada have been gradually falling, but in Vancouver and Toronto they are rising from record lows in 2018.

That’s according to Better Dwelling, which tracks Canadian real estate market trends and was co-founded by analyst Stephen Punwasi.

In Vancouver, mortgage delinquencies, which are measured by the rate of mortgages that are 90 days overdue, reached 0.13 per cent in the first quarter of 2020. That is 8.3 per cent higher than the same quarter in 2019 and has been steadily rising from 0.1 per cent in 2018. Similarly, in Toronto, there was a 10 per cent increase between the first quarter of 2019 and the first quarter of 2020.

The last couple of weeks of the first quarter were the start of pandemic lockdowns in Canada, but the trend to higher figures in Vancouver and Toronto were well established before then.

Mortgage delinquencies are all about how quickly a home can be converted into it cash value. In a hot market, with homes selling fast, an owner who can’t keep up with payments can list the home for sale, get an offer and close within 90 days. There is no effect on the delinquency rate and it stays low.

However, as Better Dwelling explains, “when the market starts to stall, and sales take longer — that’s when delinquencies start to rise. High default rates reflect the inability to exit your real estate in a timely fashion.”

The change in trend from falling to rising delinquencies “will be something to watch, but more of a 2021 story,” said Vancouver realtor Steve Saretsky.

He thinks there will be a related steady increase of foreclosures over the next couple of years. However, the process in B.C. is very long and drawn out.

“From the time you miss a mortgage payment to the time the house sells in court, it takes an average of between 12 to 15 months,” Saretsky wrote in a report released Friday.