Arrears Hit A 5-Year High
Banks Shrink Books
Canada’s big banks are seeing a sharp erosion in mortgage credit quality. Canadian Bankers Association (CBA) data shows mortgage arrears climbed sharply in October. The rate now sits at a five-year high, but the stress may be even worse than it appears. CBA member banks are holding fewer total mortgages, potentially signaling risk mitigation, as reported 251230.
Canada’s largest banks continue to see borrowers fall behind on mortgage payments. The arrears rate at CBA member banks climbed 1 basis point (bp) to 0.25% in October, up 4 bps from last year. The rate is now the highest since September 2020, and now sits above pre-pandemic levels.
Canada’s largest banks are also hanging onto fewer mortgages, amplifying pressure. The CBA reported 4.96 million mortgages held in October, down 0.91% from last year.
Banks often sell non-performing loans (NPLs) to more risk tolerant B-lenders. They also conduct non-renewal purges of riskier borrowers, sending the problem downstream.
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