As the Bank of Canada raised interest rates last year, many Canadian homebuyers registered to pay more than 25% of their income into mortgage payments.
According to Bank of Canada data released on Friday, roughly 29% of Canadian homebuyers between October and December 2022 agreed to pay a quarter of their income towards mortgage payments.
“All else being equal, a household that spends a large portion of its income on mortgage payments may be more vulnerable,” wrote a Bank of Canada report. “The Bank uses the share of new mortgages with a [rate] greater than 25% to identify the most vulnerable households.”
The number of Canadians in this bracket doubled year-over-year.
In the year prior, only 12% of Canadians fell into this category. Going back to 2014, that number never exceeded 16%.
A Carleton University business professor told True North the situation is not as bad as it may seem.
Professor Ian Lee said it’s concerning that such high shares of Canadians’ income are being spent on mortgages, but Canadian borrowers are likely not in trouble.
“If significant numbers of borrowers were in trouble, it would show up in national mortgage delinquency ratios,” he said. “But it does not. National ratios are at lowest ever in Canada.”
National mortgage delinquency ratios are a number to show the share of borrowers who are behind on payments. In December 2022, the number who were behind three or more months dropped to an all-time low of 0.15%.