Mortgage renewals wave set to drive delinquency rates up in 2025: CMHC – National

Canadian homeowners continue to face risks from a looming shock in mortgage renewals, even as the Bank of Canada lowers its benchmark interest rate, a report released Monday warns.

The Canada Mortgage and Housing Corp. (CMHC) said Monday that the mortgage delinquency rate — the proportion of Canadians who have missed payments on their mortgage — continued to rise in the second quarter of 2024.

Compared to the previous quarter, the delinquency rate rose just a few thousandths of a percentage point to around 0.192 per cent by the end of July. That’s up from the all-time low of 0.14 per cent recorded in 2022, and from 0.17 per cent seen at the end of 2023.

But CMHC noted the delinquency rate on mortgages is still “well below” the 0.28 per cent seen pre-pandemic in 2019.

While Canadians continue to make payments on their mortgages, there are signs of stress bubbling up on other credit products, which CMHC warns could continue to spread to home loans.

Auto loans saw a “significant increase” in delinquency rates in the second quarter of the year, rising to 2.42 per cent from 2.11 per cent in the previous quarter. Credit cards and lines of credit also saw their delinquency rates rise over the first six months of 2024, CMCH said.

“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,” the report read.

While the Bank of Canada has begun an interest rate easing cycle, so far lowering its policy rate by 1.25 percentage points since June, the CMHC warns that there are still risk for more than a million Canadian homeowners set to renew their mortgages in the year ahead.

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The vast majority of fixed-rate mortgages set for renewal in 2025 were taken out when the central bank policy rate was at or below one per cent, the report noted.

With the Bank of Canada policy rate now at 3.75 per cent, at least 1.05 million mortgage consumers will be renewing their loans “at significantly higher interest rates” next year, CMHC said.

Many economists, meanwhile, expect the central bank will continue to cut its key rate through 2025.

More to come…

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