MORTGAGE DEFAULTS

Like life itself there are usually two sides to every story. When we read about the latest news in buying and selling it usually pertains to prices, interest rates and popular areas. The other side has reared its ugly head lately discussing dropping prices, higher interest rates and the stagnant market. Then there is the really nasty stuff – mortgage defaults. Seems there are more and more these days. Which shouldn’t come as a huge surprise. Think about it. When we were trying to see our way through the unheard of Covid crisis, mortgage interest rates were literally bottoming out. Banks were almost paying you to take their money. Like the market itself, what goes up must come down and vice versa. And that is where we are at right now. Those once in a lifetime rates are no longer. Reality set in and the rates jumped back up to pre-pandemic numbers. So if some buyer paid way too much 5 or 6 years ago when bidding wars were all the rage AND had a super low interest rate on their huge mortgage, well that was just a recipe for disaster waiting to be unleashed. Rates go up. Value of home goes down. Ability to pay said mortgage suffers. Voila. We have essentially what happened in the U.S. in 2008/09. Except that was done by banks and lenders being sloppy and in many cases misleading consumers. This latest mess is merely a result of fallout from paying too much at the wrong time. Real Estate always has and always will be cyclical. Like death and taxes, it’s one of the few things you can count on. Back in the early 80s interest rates were reaching over 20%. Yes, you read that right. In many instances people were dropping the keys off at the bank and saying “you can have the place.” That was the beginning of a rough stretch for home owners. Continuing the cyclical nature, that passed and rates dropped. Boy did they ever. And now here we go again. CMHC analysis, based on Equifax data, suggests that mortgage arrears rates are expected to keep rising moderately across Canada from late 2025 to late 2026. However, the pressures vary across 9 major Canadian markets, with Toronto and Vancouver being the most at risk. There are a number of reasons why. They include: Concentrated “mom-and-pop” investor activity facing rising carrying costs and softening rents, leading to negative cash flow positions. Declining home prices and slower sales, reducing the ability to sell quickly or rely on equity during financial challenges. A weaker labour market in the Greater Toronto Area (GTA) compared to other major CMAs, limiting households’ ability to manage rising mortgage payments. Delinquency pressures in the GTA are expected to remain elevated throughout 2026. Like the reality of life itself, there are no shortcuts that will work. People have to adjust spending habits and expectations to ride this out. This also presents a possible problem for realtors. In some cases a person selling may not have enough equity in the home to be able to afford the service fees. The smart agents will ensure that there are enough funds to cover or they, too will be out of luck. Feel free to check out this story and more on my blog site at: https://slackie14.wixsite.com/buy-sell-and-more