Last Updated on October 24, 2023 by Kandace Gallant
A mortgage deferral is an agreement between the mortgage borrow and the lender that allows the borrower to delay their payments for a certain period of time and once that period ends, regular mortgage payments will resume. This includes the mortgage payments that were deferred. As stated on the Government of Canada’s website, the lender will decide how that payment will be repaid.
Known as Canada’s “Big Six” banks, as of the quarter ending on July 31 of this year, they have approximately 510,530 mortgages on payment deferrals. The Big Six are The National Bank of Canada, Royal Bank, the Bank of Montreal, Canadian Imperial Bank of Commerce, Bank of Nova Scotia and Toronto Dominion Bank.
The Canadian bank with the largest number of payment deferrals? The Royal Bank of Canada with 138,830 deferrals, followed by Toronto Dominion Bank with 107,000 deferrals, and the Bank of Nova Scotia falling in third place with 99,000 deferrals. The only bank of the Big Six to see a quarterly increase was the Bank of Montreal.
What are the deferrals worth? $136.27 billion due to the COVID-19 global pandemic that brought everything to a halt.
According to calculations released in early September by Canada Mortgage and Housing Corp., approximately $1 billion worth of payments were deferred each month during the pandemic. That ended up equaling 75 per cent of Canadian homeowners, therefore, homeowners aren’t expected to get ahead of their mortgage payments this year – a trend that became quite popular in 2019. Combined with job loss, low-income households are definitely struggling with both their existing and new debts even despite the low-interest rates.
However, despite many homeowners rushing to defer their payments during the beginning of the pandemic, after about four to six weeks, they started beginning their repayment journey as stated by the Home Capital Group Inc. chief executive Yousry Bissada in a conference on Wednesday.
The mortgage deferral option was offered to homeowners in March and is available until September 30 of this year. On top of government assistance, the Government of Canada teamed up with banks like the Royal Bank of Canada to set up client relief programs for clients struggling during these tough times. So, while short-term solutions are offered, homeowners will need to pay slightly higher payments after the deferral period ends due to accrued interest.
The Royal Bank of Canada president and CEO, Dave McKay, said that the bank is navigating these uncertain times in a position of strength and stability. That’s why it’s important to choose a bank that can handle unexpected economic downturns as you’re with them for the long-run.
It’s currently unclear what lies ahead of the banks’ statistics in the coming months although it’s suspected that they’ll release that information soon enough, including the number of distressed households. But one thing is for certain, there are still a large number of Canadian households struggling to pay their mortgage or rent due to COVID-19.
