House Standing Committee on Finance (February 13, 2024)
ISSUE: FCAC’s research into financial well-being of mortgage-holders

(see Annex for more details)

Key points

• FCAC has been tracking the financial well-being of Canadian renters and 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 Dec 2023 show a slight improvement at 37%)

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 2023, that percentage had risen to nearly 35%.
    • In other words, more than 1 in 3 mortgage-holders are having difficulty meeting their financial commitments.
  • As well, an increasing percentage of Canadian homeowners with a mortgage said they spent more than they earned each month.
    • According to data we collected in 2019, a little over 18% of homeowners with a mortgage said they spent more than they earned.
    • By year-end 2023, that percentage had grown to just over 29%.
  • And similarly, an increasing percentage of Canadian homeowners with mortgages said they needed to borrow to meet daily expenses.
    • The 2019 data indicated that just under 31% of homeowners with mortgages had to borrow to meet daily expenses.
    • By year-end 2023, that percentage had grown to roughly 38%.
  • The stress level for mortgage holders is growing at a faster rate than for other groups.

2. How many consumers are at risk of default? The CBA shows that only 0.17% of residential mortgages are in arrears, as of November 2023 (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.