Now, as the wave of renewals of five-year mortgages taken out before the sharp rise in interest rates in 2021 comes to an end, the number of homeowners forced to hand their keys back to the bank has not soared, as many predicted.
According to a forecast by Desjardins economist Kari Norman published Thursday, the number of mortgage payment delinquencies should now stabilize and begin to decline in 2027.
“As the peak of five-year mortgage renewals passes, the pressure associated with higher payments should ease,” she predicts.
As for homeowners who took out loans during the period when interest rates were at their highest—from 2022 to 2024—they can now take advantage of lower rates when renewing their mortgage.
> Owners of three-year mortgages are likely already renewing them at a rate lower than the one they previously had.
> **Kari Norman, Desjardins economist**
Unemployment, inflation, and housing prices can also affect the number of mortgage payment delinquencies, Kari Norman says. However, in her words, “the current situation points more to a stabilization of delinquencies than to a deterioration.”
There are other signs that, despite economic uncertainty, households continue to spend money on goods and services that are not among the most essential, unlike housing. According to data from the Royal Bank of Canada, which tracks customer spending on credit cards, Canadians’ discretionary spending—on clothing, restaurants, and travel—rose by almost 10% over the past year.
## The expected crisis
A mortgage payment is considered delinquent if it is 90 days or more past due. In Canada, the number of such delinquencies has been rising since 2022. They now account for 0.28% of all mortgages—double the exceptionally low 0.14% recorded right after the pandemic.
When the Bank of Canada began rapidly raising interest rates to combat the inflation that followed, many economists and financial institutions feared a crisis in the housing market during the mortgage renewal period.
Those fears did not materialize. According to the Bank of Canada, five-year mortgages that still have to be renewed at higher rates account for only 12% of all mortgages issued in the country.
Those who have already gone through this stage “were able to cope with the increase in payments, and therefore lenders did not face a widespread rise in credit losses,” the Bank of Canada notes in its latest Financial System Review.
The Canada Mortgage and Housing Corporation (CMHC), which insures mortgages for homeowners whose down payment is less than 20%, also has a clear sense that the fears were stronger than the real consequences.
Despite the rise in delinquencies, the head of the federal agency, Colin Volk, is not pessimistic about how the situation will develop.
“There is indeed more strain being felt in the market,” she acknowledged in an interview with *La Presse* on Thursday, “but for now we are not worried, because the market remains resilient.”
“It is true that the delinquency rate has risen, but historically it is still very low. We are an insurance company and we always plan for potential insurance payouts. So far, their volume has been lower than what we built into our budgets.”
