Mortgage debt grew at fastest pace since 2008, CMHC says

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Historically low interest rates have pushed mortgage debt up 9% on an annual basis in 2021, its fastest pace since 2008.

This pace of growth has continued through the first two months of 2022, with year-over-year growth exceeding 10.6%, according to new data from the Canada Mortgage and Housing Corporation (CMHC). ).

In its semi-annual report on the residential mortgage industry, CMHC said the acceleration in mortgage borrowing was due to an increase in uninsured mortgages for purchases and refinances.

Chartered banks saw new mortgages increase 43% from 2020, while refinances increased 22%. That translated to about $400 billion in residential mortgages being added to their balance sheets, CMHC said.

Meanwhile, credit unions added $54 billion in new residential mortgage debt to their portfolios.

The majority of Canadians switched to variable rates in 2021

With variable rates falling well below fixed rates in 2021, a majority of new borrowers (53%) switched to floating rates in the second half of the year, according to CMHC data. That was up from 34% in the first half.

It appears that the share of variable mortgages peaked in January 2022, with 56.9% of new mortgages being variable rate products.

“While this trend has continued through the first two months of 2022, it appears to have leveled off in response to recent increases in mortgage interest rates,” CMHC noted.

Borrowers were less indebted than in 2020

CMHC data also showed a downward trend in the distribution of loan-to-value ratios (LVRs) of new uninsured mortgages towards the end of 2021. The percentage of borrowers with a LRP of 65% or less is rose to 38.2% from 37.1%. in 2020, while those with an LTV of 75% to 80% fell to 44.2% from 45%.

Despite the recent decline, however, borrowers were still more indebted than in previous years. In 2016 and 2017, the percentage of uninsured borrowers with an LTV of 65% or less was 43.5% and 42.8%, respectively.

Mortgage arrears fell for all types of lenders

CMHC reported that late payments of more than 90 days were down across all types of lenders.

“Consumers continued to make their mortgage payments on time or were able to reach an agreement to defer their mortgage payments during this time,” CMHC said. “Highly liquid real estate markets likely contributed to this downward trend.”

Among chartered banks, the arrears rate fell to 0.17% at the end of 2021, from a high of 0.25% in the third quarter of 2020. Credit unions reported an average arrears rate 0.10% (down from 0.15% in 2020), while other non-bank lenders saw a rate of 0.23%, down slightly from 0.26% in 2020.

Mortgage Investment Entities (MIs) had a significantly higher arrears rate at 1.38%, compared to 1.78% in Q3 2020.

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