Despite the government’s fiscal assistance programs, a significant fraction of mortgages under deferral are likely to go into default, according to RBC Capital Markets analyst Darko Mihelic and senior associate Sanly Li.
“We believe 10% to 20% of mortgages under deferral are at a higher risk of defaulting,” the duo said in their report last week. “We are most concerned about borrowers on a deferral program who are unemployed (and were receiving the Canada Emergency Response Benefit, or CERB) and borrowers on a deferral program who are employed but are earning less than what they earned pre-COVID.”
At present, around 11% of borrowers at the largest Canadian banks have not resumed payments. This amounted to a total of approximately $175 billion in unpaid mortgages, RBC said.