Standing Senate Committee on Banking, Commerce and the Economy (BANC) (May 30, 2014)
ISSUE: FCAC’s research into financial well-being of mortgage-holders

Key points

• FCAC has been tracking the financial well-being of Canadian homeowners with and without mortgages through its Monthly Financial Well-Being Monitor since 2020.
• The data indicates that a growing number of Canadians are struggling to keep up with their financial commitments.
• A key finding identified last spring was that homeowners with a mortgage are increasingly at risk of experiencing financial hardships, such as having to increasingly borrow for daily expenses or draw on savings.
• When FCAC developed its Guideline, only about 1 in 3 mortgage holders could meet their financial commitments without difficulty. (The latest stats for January to March 2024 show a slight improvement at 38.7%)

Qs & As

1. When developing its Guideline, what evidence did FCAC have that mortgage holders are at risk and experiencing financial stress?

• According to data we collected through FCAC’s monthly survey of Canadians’ financial well-being, in early 2023 we began to see a growing number of Canadians with mortgages that were facing financial difficulty.
  • For example, data we collected in 2019 showed that roughly 20% of mortgage-holders had trouble or struggled to keep up with their financial commitments.
  • By year-end 2022,, that percentage had risen to about a third of Canadians with mortgages
  • As well, our data showed that an increasing percentage of Canadian homeowners with a mortgage said they spent more than they earned each month and needed to borrow to meet daily expenses.

2. How many consumers are at risk of default? The Canadian Bankers Association shows that only 0.19% of residential mortgages are in arrears, as of February 2024 (delinquent for 90 days or more).

• Mortgage default rates currently remain low. However, there has been growing evidence showing that Canadians are struggling to keep up with their financial commitments because of the current economic environment.
• One of the key findings of FCAC’s research is that homeowners with a mortgage are increasingly at risk of experiencing financial hardships, such as having to increasingly borrow for daily expenses or draw on savings.
• FCAC is also concerned that consumers are struggling with non-mortgage debt, including debts related to credit cards, lines of credit and auto loans.
• Mortgages are typically the last form of debt to go into default. As a result, missed payments on other types of debt can be early signs of financial distress.