Canada’s largest bank is prepared for the wave of mortgage defaults coming. Phew! Wait… what defaults? RBC Capital Markets sent a research note to clients last week. In it, the analysts mention up to a fifth of deferred mortgages are at risk of default. It’s great the bank is well prepared for this event, but it does bring up a lot of questions. Most notably, how effective are the Bank of Canada (BoC) policy measures? After all, the default rate RBC is forecasting is higher than the BoC said would happen if they did nothing at all.
One In Five Mortgages Deferred May Default In Canada
RBC sent a research note to institutional clients that mentions upcoming mortgage defaults. In the research note, they state “we believe 10% to 20% of mortgages under deferral are at a higher risk of defaulting.” Further adding, “if 20% of mortgages under deferral eventually become delinquent in Canada, this equates to a mortgage delinquency rate of 2.3% which is almost 4 times higher than the peak Canadian mortgage delinquency rate over the past 30 years.” Even at that rate, it’s still relatively low in the grand scheme of things. However, as the analysts note, it’s higher than Canada has seen in recent history…CLICK for complete article