Many of Canada’s lenders and mortgage insurers stepped up to the plate at the height of the pandemic by offering homeowners the option to defer their mortgage payments by up to six months.

But as we approach the end of those payment deferral programs, some homeowners who still find themselves in a precarious employment situation, are rightfully concerned about how they’ll be able to remain in their homes.

More than 760,000 mortgage-holders opted to defer their mortgage payments at the height of the pandemic, according to data from the Canadian Bankers Association. That’s approximately 16% of all bank-originated mortgages.

Many have since resumed their normal mortgage payment schedules, with many non-bank mortgage lenders reporting a sharp drop in deferrals from May to July. First National, for example, now has just 4.5% of its loan portfolio in deferral, down from 13.9%.

Some of the Big 6 banks, however, continue to report many clients still on deferral plans. Scotiabank, for example, says 18% of its mortgagors are still deferring payments.

But the window for applying for a mortgage deferral hasn’t closed just yet.

Many of the large banks have announced extensions to their mortgage deferral plans. Clients now have until September 30 to apply for a pause on their payments for up to six months.

Some banks, like CIBC, are limiting new deferrals to clients who haven’t yet used the program. However, most lenders have said they will continue to assist clients in need on a case-by-case basis.

CMHC Promises ‘New Tools’ to Help Borrowers

The Canada Mortgage and Housing Corporation (CMHC) is also stepping forward to assist struggling homeowners, promising “new tools with our partners to help Canadians during this unprecedented pandemic.”

No information has been made available yet, but the Canadian Credit Union Association, in a survey to its member credit unions, said CMHC is considering the following potential options:

• Extended amortization and amortization periods
• Special payment arrangements
• Adding missed payments to mortgage balances

CMHC has not confirmed any details yet.

Strong Real Estate Market Will Cushion Those Who Choose To Sell

Inevitably, some Canadian homeowners will exhaust their options, such as relying on savings and lines of credit to cover their mortgage payments, and will likely find themselves deciding to sell.

A positive in this crisis is that the housing market has remained surprisingly strong, meaning any forced sellers will be selling in a market with strong demand and high prices, unlike most previous economic downturns. In July, for example, average home prices were up a shocking 14.3% compared to the same period last year, according to the Canadian Real Estate Association.

“If national housing inventory stays tight, forced sellers will be liquidating into strong demand, cushioning the price impact,” mortgage expert Rob McLister wrote in the Globe and Mail recently.

And many won’t wait until they’re forced to sell by their lender, McLister adds.

“A good chunk of unemployed mortgage deferrers will sell before their lender or default insurer forces their hand,” he wrote. “Most have ample equity and they won’t want to lose it.”

If you are one of these homeowners experiencing difficulty meeting your monthly payments due to interrupted employment or income, a TMG broker can assist by reviewing all options that are currently available to you. Get in touch today.