Canada mortgage defaults and foreclosures rising
Mortgage brokers are beginning to see more instances of default on privately financed loans and an increase in powers of sale as the central bank raises interest rates at an unprecedented clip.
“We’re starting to see some power in sales in the marketplace in the GTA, and we are also starting to see some people defaulting on some private mortgages as well,” Leah Zlatkin, mortgage broker and expert at lowestrates.ca told Financial Post’s Larysa Harapyn.
Zlatkin was speaking just days after the Bank of Canada lifted the policy rate by 50 basis points, bringing it to 4.25 per cent when 11 months ago it sat near zero. Governor Tiff Macklem is walking a delicate balance between bringing down inflation levels not seen in four decades while preventing the economy from tipping into recession.
While higher interest rates have taken some of the heat out of the country’s real estate market, economic readings are coming in stronger than expected. Consumer price growth has slowed, but it’s still near seven per cent. The unemployment rate is at 5.2 per cent, a level most economists deem full employment — meaning anyone who wants a job has one or can get one — at a time when demand for labour hasn’t let up.
“We’re seeing inflation numbers still very high and we’re still seeing a lot of Canadians well-employed and recession clearly hasn’t hit,” Zlatkin said. “At this point, the Bank of Canada may have no choice but to increase rates again in the new year.”
That could cause further troubles for the country’s rate-sensitive housing market and people with home equity lines of credit and uninsured mortgages might want to consider speaking with a broker to discuss refinancing, Zlatkin said, adding she’s seeing more people hit their trigger rates.
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