The federal government’s mortgage stress test was expanded in January in a bid to protect homeowners from becoming overextended, particularly in Vancouver, which has the highest average home prices in Canada.
Yet the latest data on mortgage defaults shows that Vancouver homeowners have the lowest delinquency rate in the country at 0.08%, one of the tiniest ever recorded.
When the stress test was revised this year, the Office of the Superintendent of Financial Institutions (OFSI) said it was a prudent move to keep mortgage holders from running into financial trouble. The test requires all those applying for a new mortgage to qualify at a lending rate 2% higher than what is generally available in the market.
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“We clearly see the potential risks caused by high household indebtedness across Canada and by high real estate prices in some markets,” OFSI superintendent Jeremy Rudin said at the time. “We are not waiting to see those risks crystallize in rising arrears and defaults.”
As of the first quarter of this year, though, the delinquency rate for existing mortgages fell to 0.08%, down from a peak of 0.6% in the third quarter of 2014, despite the average monthly mortgage payment rising to $1,800, up 6.3% from the first quarter of 2017, according to Canada Mortgage and Housing Corp. (CMHC). A mortgage is considered delinquent if three consecutive mortgage payments are in arrears.