Mortgage debt is growing amid pandemic, but borrowers are coping well with their mortgage obligations

The recent report by Statistics Canada shows that mortgage debt rose sharply amid the COVID-19 pandemic. However, the expected credit losses are still under control.

In 2020, mortgage borrowing reached a record high level, as Canadians added almost $108 billion in mortgage debt. Meanwhile, we’ve seen only less than two-thirds of that in 2019 and less than $46 billion in 2018.

According to Statistics Canada, such an increase in borrowing was caused by a combination of extremely low interest rates and a strong demand for real estate.

“March saw historically low interest rates, and mortgage renewals were up significantly. As a result, the total value of mortgage renewals was up by 13.3% on a seasonally adjusted quarterly basis,” – the report says.

About half (49%) of bank borrowers preferred five-year fixed-rate mortgages, marking a 7% gain from the beginning of 2019.

In spite of the hike in borrowing and the economic challenges caused by the pandemic, StatsCan believes the expected credit losses on mortgage loans are still about 0.1% of mortgage debt in Q3 of 2020.