Mortgage rates rise despite the Bank of Canada rate cuts: Mortgage Broker
Canadian banks are seeing the pace of mortgage-deferral requests easing up a bit, three weeks into a program that gives homeowners a break from making payments amid the coronavirus pandemic.
Almost 600,000 requests for mortgage deferrals or skipped payments have been completed or are being processed since Canada’s banks announced the program on March 17, the Canadian Bankers Association said Monday. Some 213,000 were handled in the first nine days of the program, and total requests reached 500,000 by April 3.
“People have had a chance now to catch their breath a little bit and take stock in their personal financial situation,” Neil Parmenter, president and chief executive officer of the association, said in an interview. He described the response in the first week as “unprecedented.”
Initial demand may have been fueled by unwarranted homeowner fears that the relief program was a “first-come, first-serve” limited-time offer combined with the approaching start of the month, when payments would be due, Parmenter said. The cooling pace of deferral requests doesn’t mean demand has peaked.
“I don’t know if we can say it’s behind us because the requests are absolutely still coming in,” he said. “The traffic continues to be elevated from where it’d normally be.”
Canada’s six largest banks have deferred about 12 per cent of the mortgages in their combined portfolios so far, and small and midsize banks have also deferred a “significant” number of the mortgages on their books, the association said. Some banks have reported that more than 90 per cent of those seeking a deferral are approved.
The cash flow freed up by Canadians from deferrals completed to date is about $778 million (US$561 million) a month, or $2.3 billion a quarter, according to estimates from the association using an average monthly mortgage payment of $1,326. That number will grow in the weeks ahead, as more deferral requests are processed, the association said.
The federal government’s $25 billion Canada Emergency Business Account has also shown strong pickup, with the country’s five biggest banks approving more than 72,000 loans for small-business clients on Friday, the program’s first day. That’d be worth about $2.89 billion in loans, assuming clients took up the full C$40,000 of interest-free government-backed loans offered to them.
“We knew the demand was obviously going to be heavy,” Parmenter said of the small-business relief program.