CEO Bruce Sellery Discusses Rising Mortgage Delinquency Rates in Canada

Are housing costs putting you into debt? The increasing cost of living has put many Canadian homeowners in a tough spot as they struggle to keep up with high mortgage rates.

For many, the prospect of shelling out hundreds of extra dollars for a mortgage payment that goes beyond what they may have planned for, while also meeting minimum payments on monthly bills and credit cards, is extremely overwhelming – some may even feel it’s impossible. This has led to an increase in mortgage delinquency rates across the country, with more Canadians reporting missed payments. Others, like Michelle, have had to make the difficult decision to put their house up for sale.

“Last year when I was struggling to make some of my mortgage payments, it impacted my credit. So, to go to an A-lender isn’t possible at this time…[my payments] have tripled…I’ve depleted my savings and have cut as much as I can.”

~ Michelle, a Caller on CBC Radio’s Cross Country Checkup talking about why she made the decision to sell her home.

Small changes in mortgage interest rates can make a big difference in how much you’ll pay each month. In Canada, mortgage rates rise and fall based on various factors. Changes in central bank policies, economic conditions, global trends, housing market dynamics, and regulations all play a part. These factors affect how much homeowners pay for their mortgages and influence the overall housing market. The increasing monthly payments also have an impact on Canadians’ quality of life.

“Earlier you could enjoy your life, but now… you can’t take your kids out for extra activities, and even eating out has become so expensive… there’s definitely mental stress with all your money going towards your mortgage payments.”

~ Caller on CBC Radio’s Cross Country CheckUp.

If you’re worried about increasing rates or feel like you’re drowning in debt, you’re not alone. At Credit Canada, we speak to clients who have valid fears about losing their homes every day – we understand the stress and anxiety. You yourself might be experiencing a similar situation, which is why you’ve found yourself here reading this blog post. Below we’ve outlined strategies and tips from Credit Canada CEO Bruce Sellery to help homeowners ease their stress and prepare their finances to deal with mortgage delinquency, missed payments, and debt amid rising interest rates. 

Rising Mortgage Delinquency: Cause for Concern?

According to Equifax Canada, mortgage delinquency rates across the country rose 52.3 percent in the fourth quarter of 2023 compared to the year prior. These effects are becoming more visible as people renew their mortgages, especially in provinces with higher housing costs.

The agency said there was a notable increase during the fourth quarter of 2023 in missed mortgage payments by consumers in Ontario and British Columbia, surpassing pre-pandemic levels. In Ontario, the rate of mortgage delinquencies soared by 135.2 percent compared to the previous year, while in B.C., the rate increased by 62.2 percent. This might not be surprising to you – chances are you’ve been hearing your friends, family and others around you expressing frustration and concern about their increasing mortgage payments for a while now.

As housing expenses take up a larger portion of monthly budgets, Canadians are resorting to credit cards and lines of credit to cope with the strain. In the fourth quarter, Equifax reports that total consumer debt surged to $2.45 trillion, marking a 3.2 percent increase compared to the previous year, while non-mortgage debt experienced a notable uptick of 4.1 percent, largely propelled by a rise in credit card debt.

According to Equifax, there is a rising occurrence of credit payment defaults among homeowners in Canada, particularly those aged 36 and younger in Ontario and B.C. The agency says this is because younger homeowners tend to have higher mortgage amounts owing and less savings to rely on. 

This is cause for concern because as homeowners continue to renew their mortgages at a much higher interest rate than previously, they may struggle to maintain their monthly payments – not only on their mortgages, but on other bills and credit cards. This adds to their debt, impacts their repayment abilities, and increases the risk of insolvency. Equifax Canada noted that although consumer insolvency levels remain lower than pre-pandemic levels, the rise in mortgage holders declaring bankruptcy is worrisome.

Managing Rising Mortgage Payments: Tips from Credit Canada CEO Bruce Sellery

As a non-profit organization and Canada's first and longest-standing credit counselling agency, at Credit Canada we are hearing the stress and strain from our clients and have helped thousands avoid bankruptcy, become debt-free and achieve financial wellness. Our Credit Canada CEO Bruce Sellery recently joined CBC Radio’s Cross Country Checkup to offer some insight and advice on navigating stress and financial difficulties due to rising mortgage payments. Despite it feeling like an insurmountable situation, Bruce says it’s important to be proactive about the options available when struggling with mortgage payments.

“We need to validate people's experiences – the frustration, the upset, the fear, the shame – all of that, because in the absence of doing that, it becomes exponentially more difficult for people to get unstuck and into action."

- Bruce Sellery, CEO, Credit Canada

Below are some actions homeowners can take to tackle rising mortgages and missed payments.

Track Your Spending and Create a Budget

Whether interest rates are going up or down or your mortgage is renewing soon, Bruce suggests creating a budget for all scenarios to ensure you're financially prepared for any circumstance. Being prepared will help prevent you from feeling overwhelmed. 

“Do a budget for today and a budget for tomorrow because there is so much talk about this rate cut that will come at some point – maybe it's summer, [but] will that make a significant difference?” Bruce said. “Because otherwise, really, you may be postponing the inevitable choice that you will need to make.”

Hoping that interest rates will soon come down is not a “pragmatic” approach to managing your finances, Bruce says. Depending on the reduction percentage, a rate cut may not help your financial situation enough. Instead, create a practical budget and stick to it! There are many online budgeting tools and apps that can help you establish a realistic spending plan, including Credit Canada’s free Budget Planner + Expense Tracker.

“At Credit Canada, we're very often the first call because we're non-profit, we're not judgmental – this is what we do every day all day. And our counselors will walk through your budget with you and they'll walk through the different options that you have,” Bruce said.

It’s also important to pay off any credit card balances in full each month. If you don’t, you’re essentially “renting money” and slowly taking on more debt over time without a clear path on how to pay it off. While Bruce acknowledges it is agonizing to make cuts elsewhere to pay your bills, doing so will help in the long run. 

“You're renting money and what do you get out of it? Not a heck of a lot. So the sacrifices that you can make to reduce that balance to zero – as excruciating as that is – really will make a significant difference in your financial well-being always,” Bruce said. 

Communicate with Your Lender About Potential Options

Calling your mortgage lender and admitting to financial struggles can feel intimidating. However, you can negotiate with your lender if you are having difficulties making mortgage payments. 

“So many people dealing with circumstances like this – they have such a hard time, it's so terrifying to pick up the phone and call your creditor,” Bruce said. “[But it’s] really critical that people look and see what the options are.”

Depending on the circumstance, some options available may include: 

• A short-term mortgage payment deferral
• Extending the amortization period of the mortgage
• Switching from a variable rate to a fixed rate mortgage
• Adding payments that are in arrears to the mortgage

It’s important to know that these options are only available to those who communicate with their lender. “No one is coming to save you. There is help out there, but you have to initiate it. You have to pick up the phone,” Bruce said.

Seek Professional Guidance

While Bruce says “there’s no easy fix” to mortgage delinquency, speaking to a professional can help ease your stress and provide guidance on tackling debt to get your finances back on track.

“It's never just one thing. So maybe the mortgage is the most acute issue, but quite often people who are dealing with a mortgage they can't pay, have credit card debt, or they're unemployed or underemployed, or they have a mental health issue – there's just so many different factors,” Bruce explained. 

We at Credit Canada understand that balancing expenses, debt, and mortgage payments can be challenging, and we offer a variety of free resources to help you take control and manage your finances. We can also help homeowners take proactive steps to improve their financial literacy and offer free education related to mortgage management.

“What we endeavor to do is help people uncover insights about their relationship to money and prompt them to take action. We really think holistically – we actually say that debt's not the problem, debt's the symptom. So if debt is the symptom, what's the problem?"

- Bruce Sellery

“Non-profit credit counsellors are the first call that you can make because they have insight into all these other variables,” he added.

From workshops and webinars to credit counselling services and other resources, we’re here to assist and help empower you to make informed decisions about your financial stability. Reach out to us today to learn more!