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Risks Rise in Canadian Mortgage Market

Rising mortgage delinquency rates and risks in Canada's alternative lending sector are cause for concern, as millions of mortgages face renewal at higher rates.

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Canada

EconomyLabour MarketInterest RatesHousingMortgagesDelinquency

Canada Mortgage And Housing Corp.Bank Of Canada

What are the current trends in Canadian mortgage delinquency rates?: Mortgage delinquency rates in Canada are rising, particularly within the alternative lending sector, where rates surpassed pre-pandemic levels. This increase is driven by factors such as higher loan-to-value ratios and a greater proportion of mortgages where alternative lenders are not first in line for repayment.
What are the key concerns regarding the alternative lending market in Canada?: The Canadian Mortgage and Housing Corporation (CMHC) highlights growing concerns about the alternative lending market's increasing risk profile, marked by rising defaults and foreclosures within the single-family home segment. This underscores the vulnerabilities within this sector.
What is the impact of recent Bank of Canada interest rate adjustments on upcoming mortgage renewals?: While the Bank of Canada has recently lowered its key interest rate, borrowers renewing mortgages in 2025 will still face substantially higher rates than those prevalent a few years ago. This, combined with rising delinquencies in other areas like auto loans and credit cards, adds to the overall financial pressure on Canadian households.
How many mortgages are expected to be renewed in 2025, and what is the potential risk associated with these renewals?: Approximately 1.2 million mortgages are set for renewal in 2025, 85% of which were signed when interest rates were significantly lower. This presents a risk of increased financial strain for borrowers as they transition to higher rates.
What is the overall outlook for the Canadian housing market, considering the rising delinquency rates and other economic factors?: Despite the rising delinquency rates and risks in the alternative lending space, the overall housing market has shown resilience. However, CMHC's report warns that further increases in mortgage delinquency rates are expected in 2025, due to a combination of high household debt and upcoming mortgage renewals at significantly higher interest rates.

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