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The Canadian Bankers Association has recently released the Mortgages in Arrears statistics through December.
Worth noting that the previous record high in November for the province of Alberta has been surpassed , and is now sitting at 0.75% (up from 0.72% in November, and 0.40% a year prior).
For the whole of Canada the rate was up just slightly, now sitting at 0.45% (up from 0.33% a year ago).
Most of the other provinces fluctuated within a mere 0.01%, except Saskatchewan, where it climbed 0.02%, but is still a national low, 0.29% (up from 0.23% a year prior).
The Atlantic provinces continue to have the second highest rate (a distant second behind Alberta), sitting at 0.51% (up from 0.42% a year prior).
British Columbia continues their slow but steady climb, and sit at 0.40% as of December, up from 0.23% a year ago.
However, when viewed in perspective, it appears that the absolute number of arrears in Canada is still very low when compared to other countries, with less than 5 out of 1,000 Canadian mortgagors being late on payments.
Also, it must be taken into account that although there are 5,699 more borrowers in arrears than a year ago, 91,986 more mortgages have been processed during that same period, out of four million active mortgages in total. These numbers show that on an absolute basis, arrears have not been excessively high in Canada.
The single factor that has always most influenced the rate of mortgage arrears is employment, more even than rising interest rates.
The chart below from Will Dunning Economic Research illustrates the relationship between Canadian employment rate and the percentage of mortgage arrears:
As it can easily be seen, when employment goes up, arrears go down, and when employment goes down, arrears go up, which makes perfect sense. It isn’t very surprising that when mortgage takers are employed they have no difficulties honoring their debts and when there are more people employed there is a larger pool of people who qualify for mortgages.
by Nouriel Roubini and Rachel Ziemba
Forbes.com
Canadian banks were conservative enough to avoid the excesses of their U.S. counterparts in recent years, due in part to a consolidated financial sector and strong regulation. Armed with strong balance sheets, these banks continued to lend throughout the recession and helped keep financial stresses in Canada from reaching the levels of their G7 peers.
Yet there are signs that the banks’ balance sheets don’t look quite as strong anymore. Canadian households have rushed to get mortgages and refinance at record low rates; the average mortgage rate was well under 5.0% in September 2009. Banks were more than happy to extend loans, particularly after the government’s purchases of the already-insured long-term mortgages helped unlock long-term capital for the banks.
Although Canadian housing markets weakened in late 2008 and early 2009, particularly in the overheated western Canadian cities, low interest rates, capital inflows, increased liquidity and a reduction in bank lending standards have helped reverse the trajectory. Housing starts, prices and sales have rebounded, despite remaining below their 2008 highs. This improvement is both a trigger and a symptom of the strong domestic demand that has helped Canada exit the recession. The fact that Canada had less excess housing stock than the U.S. is a further support. But recent moves could be overly optimistic.
Nouriel Roubini, is a professor at the Stern Business School at New York University and chairman of Roubini Global Economics (RGE).
Rachel Ziemba is a senior research analyst at RGE for China and oil-exporting economies.
Top Financial Resolutions for 2010
The Globe has made a point this year of advising Canadians on how to spend their money in a sensible and responsible manner, and so we read in their website that:
With 2009 slated to go down as a tumultuous time for your money, 2010 could prove to be the year when Canadians put their financial house in order – provided they can get their balance sheets under control.
Heading into the new year, debt is the biggest financial hurdle for many families, says certified financial planner Bradley Roulston, a manager of the Nelson & District Credit Union in British Columbia.
“Household debt – mostly mortgages and consumer debt – has increased to record levels. And with interest rates bound to go up, people need to make sure they have enough cash flow to sustain a few percentage [point] increases on their payments.”
The debt-to-income ratio among households hit a record this year. The latest Statscan report showed that for every $100 of personal disposable income, Canadians are carrying $145 in debt, up sharply from $88.60 in 1990. The ballooning debt comes at a time when the Bank of Canada is warning of higher interest rates.
But then, in the very same website, in what it may appear to be totally contradictory, we find the advice of Angela Self, one of the founders of the Smart Cookies money group, who advises to stop feeling guilty for past splurges because “is so 2009“:
The first step is to lay out your financial objectives in definite terms. Ask yourself: What do I really want? Write your response down in present tense and positive terms, and make it specific. This isn’t an exercise in taking mental notes or scribbling out sweeping statements like “make more money.” Detail the exact amount of dough you’d like to see, the date you want to start receiving it and the action steps necessary to get it done. The latter is key, and best broken down into small, tangible tasks you can work toward every day.