Canada Mortgage and Housing Corporation (CMHC) reports the decline in home sales over the first half of this year has created a slowdown of new mortgages. However, rising interest rates and steady mortgage debt growth have created higher debt servicing costs, particularly when it comes to uninsured mortgages.

Canadians in financial struggle, despite stable mortgages in arrears

Mortgages in arrears have stabilized at record-low levels, yet other patterns, like automobile loans and credit card balances, indicate more Canadians are struggling to repay debt. On top of this, 45 per cent of outstanding mortgages are up for renewal over 2024 and 2025, which will amount to $15 billion in payments each year.

Shorter mortgage terms and longer amortizations were popular

Over the first half of 2023, many mortgage holders took on terms of at least three years. This showed that hope for lower interest rates in the near-term had subsided. But, mortgages of five or more years were lower compared to shorter terms.

Amortizations were longer than before the start of recent interest rate hikes – almost two thirds of newly extended mortgages in the first half of the year came with 25-year or longer amortizations, whereas this was about half in 2020. This means lower mortgage payments, but higher lender risk.

Tania Bourassa-Ochoa, CMHC’s senior specialist of housing research, weighs in: “In the first half of 2023, more than 290,000 mortgage borrowers renewed their mortgage with chartered banks at a significantly higher interest rate. This represents about six percent of the entire mortgage market of Canada. The resulting increase in their debt-servicing costs is putting additional financial pressure on these borrowers.”

Read the CMHC’s report here.