Canadian Uninsured Mortgages Hit All-Time High

Mortgage debt is hitting new highs, but how exposed does that leave lenders? Fresh stats from the Bank of Canada (BoC) break down residential mortgages at chartered Canadian banks. What we’ve learned is the majority of mortgages are insured, but uninsured mortgages are printing all time highs in dollar value.

Majority of Mortgages Are Insured

At the end of 2016, the majority of residential mortgages were insured. The fourth quarter ended with CA$1.06 trillion in domestic mortgages, which represented a 52.75% of all mortgages. This is a 2.5% change from the quarter prior, and is actually the lowest it’s been since the third quarter of 2011. Probably worth noting here that by the next quarter the dollar volume of insured mortgages doubled last time, despite “cooling measures.” The year afterwards, the number of insured mortgages actually hit an all time high. It’ll be interesting to see if the government “spikes” the punch again.

Source: Bank of Canada.

Insured Mortgages Declined In Total Dollars

The total dollar value of insured mortgages actually declined. The dollar value of insured mortgages stood at $562 billion. This is a 1.74% decline from the month prior, but still a 2.53% increase from the same time last year. Insured mortgages typically don’t have a significant amount of equity in the property, and these stand the highest chance of falling underwater. Underwater is bankster for when the price of a home falls more than the equity in it, giving the owner negative value in their home.

Source: Bank of Canada.

Uninsured Mortgages Rise To An All-Time High

Uninsured mortgage debt has hit an all-time high. At the end of 2016, chartered banks held $503 billion in uninsured mortgage debt. This represents a 3.87% increase from the quarter before, and a massive 8.67% increase from the same time last year. The good thing with uninsured mortgages is the owner has to have significant equity in the property (at least 20%). Properties would have to fall significantly in order for these mortgages to be underwater, so they’re considered much less risk for lenders.

Concerns that a housing correction will cause all hell to break loose at chartered banks is likely overblown. The majority of mortgages are insured, and those that aren’t generally have a substantial amount of equity to protect again losses in a correction. Homeowners and bank revenues… that’s another thing.

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