Many
of Canada’s lenders and mortgage insurers stepped up to the plate at the height
of the pandemic by offering homeowners the option to defer their mortgage
payments by up to six months.
But
as we approach the end of those payment deferral programs, some homeowners who still
find themselves in a precarious employment situation, are rightfully concerned
about how they’ll be able to remain in their homes.
More
than 760,000 mortgage-holders opted to defer their mortgage payments at the
height of the pandemic, according to data from the Canadian Bankers
Association. That’s approximately 16% of all bank-originated mortgages.
Many
have since resumed their normal mortgage payment schedules, with many non-bank
mortgage lenders reporting a sharp drop in deferrals from May to July. First
National, for example, now has just 4.5% of its loan portfolio in deferral,
down from 13.9%.
Some
of the Big 6 banks, however, continue to report many clients still on deferral
plans. Scotiabank, for example, says 18% of its mortgagors are still deferring
payments.
But
the window for applying for a mortgage deferral hasn’t closed just yet.
Many
of the large banks have announced extensions to their mortgage deferral plans.
Clients now have until September 30 to apply for a pause on their payments for
up to six months.
Some
banks, like CIBC, are limiting new deferrals to clients who haven’t yet used
the program. However, most lenders have said they will continue to assist
clients in need on a case-by-case basis.
CMHC
Promises ‘New Tools’ to Help Borrowers
The Canada
Mortgage and Housing Corporation (CMHC) is also stepping forward to assist
struggling homeowners, promising "new tools with our partners to help Canadians
during this unprecedented pandemic.”
No information
has been made available yet, but the Canadian Credit Union Association, in a
survey to its member credit unions, said CMHC is considering the following
potential options:
· Extended
amortization and amortization periods
· Special
payment arrangements
· Adding
missed payments to mortgage balances
CMHC has not
confirmed any details yet.
Strong Real
Estate Market Will Cushion Those Who Choose To Sell
Inevitably, some
Canadian homeowners will exhaust their options, such as relying on savings and
lines of credit to cover their mortgage payments, and will likely find
themselves deciding to sell.
A positive in
this crisis is that the housing market has remained surprisingly strong,
meaning any forced sellers will be selling in a market with strong demand and
high prices, unlike most previous economic downturns. In July, for example,
average home prices were up a shocking 14.3% compared to the same period last
year, according to the Canadian Real Estate Association.
"If national
housing inventory stays tight, forced sellers will be liquidating into strong
demand, cushioning the price impact,” mortgage expert Rob McLister wrote in theGlobe and Mail recently.
And many won’t
wait until they’re forced to sell by their lender, McLister adds.
"A good chunk of
unemployed mortgage deferrers will sell before their lender or default insurer
forces their hand,” he wrote. "Most have ample equity and they won’t want to
lose it.”
If you are one of
these homeowners experiencing difficulty meeting your monthly payments due to
interrupted employment or income, a TMG broker can assist by reviewing all
options that are currently available to you. Get in touch today.