A greater percentage of Albertans’ mortgages have been deferred than in any other province.
Twenty-one per cent of Alberta mortgage payments were deferred in July, well ahead of second-place Saskatchewan and Newfoundland, which each had a 14.8 per cent deferral rate, says the Canada Mortgage and Housing Corp.
Quebec’s 5.6 per cent deferral rate was the lowest in the country.
The situation has led to fears that many Canadians could be facing serious financial hardship when their deferral terms run out in the next few months.
MNP insolvency expert Donna Carson said most of the clients who opted to postpone mortgage payments are facing September or October deadlines.
“People are anxious,” said Carson, senior vice-president in the insolvency and restructuring group at MNP.
“I would say in talking to lawyers who practise foreclosures, they are telling me they are getting busier.
“Most people we talk to have more debt than just the mortgage,” she said.
“I think we’re referring more people than normal to other agencies for counselling or mental health (help).”
Insolvency data shows many central Albertans continue to struggle. Nationwide, insolvencies are down 44 per cent through the first six months of the year, compared with the same six months in 2019.
Alberta is down about 40 per cent, but Red Deer is only down seven per cent, according to statistics provided by the superintendent of bankruptcies.
The economy is now showing positive signs, but MNP is hearing from many central Alberta clients that they are returning to fewer shifts and lower pay.
Insolvencies in Alberta were actually higher before the pandemic, which sparked a host of financial measures to reduce the economic impact.
If there is a positive to the insolvency numbers, it’s that 70 per cent of clients are opting for financial proposals, rather than resorting to bankruptcy, she said.
Despite Alberta’s sobering numbers — attributed to the one-two punch of the energy industry slump and the pandemic — local mortgage brokers believe deferral crunch time will not lead to widespread financial turmoil.
Red Deer mortgage broker Nicki Pike said credit checks for mortgages have turned up plenty of instances of deferred payments, on things such as vehicles or other loans. But the reason for the deferrals has not always been the need to stay afloat financially.
Some borrowers — especially when the pandemic hit and nobody knew what its impact would be — deferred payments out of caution, or as a “just-in-case” financial backup. Others saw the new deferral measures as a strategy to pay down debt or took their banks up on their offers to defer.
“So, I haven’t seen a lot of clients in a situation where they chose the deferrals out of necessity, to be honest,” said Pike, a 14-year mortgage broker with TMG The Mortgage Group.
“In the first two or three months of the pandemic, I definitely saw more of that (deferrals).
But when the pandemic did not produce some of the most frightening predictions, people have regained confidence.
“The first one or two months, there was definitely fear, but it seemed to have levelled out.
“I mean I’m swamped right now. I’ve had four people buy houses this week and a fifth one is putting in an offer today.”
Other local brokers are telling similar stories, she said: “Every broker I talk to has been busy.”
Pike believes people who may have put their dreams of owning a home on hold because of the economic downturn, and then were confronted by the pandemic, have just decided they have waited long enough and want to take advantage of rock-bottom mortgage rates.
“I think we’ve been kicked so much, people are just kind of tired of it.”
Red Deer mortgage broker Brandi Pierik said she is seeing quite a few deferrals, but for her clients, they are usually on vehicle payments or cellphone bills, or other debts. Among those looking at homes, previous mortgage deferrals are rarer.
First-time homebuyers who did opt to defer other payments are sometimes in for a surprise.
While deferring payments does not affect credit scores, outstanding payments must be caught up in most cases to secure a mortgage.
“Your ability to purchase is very much affected if you have any loans in deferral,” said Pierik, who is with Dominion Lending Centres.
“It really has impacted all of my first-time home buyers because there was that narrative that (deferral) won’t affect you negatively,” she said. “It doesn’t, in theory, unless you want to secure financing for your home.
“From a lender’s perspective, if you are not able to make your car payment, what is your case then for being able to make a mortgage payment?”
Pierik also does not think that looming deferral deadlines will lead to as much financial disruption as some fear.
“Often borrowers who were deferring mortgage payments were doing it out of a fear of what COVID might bring,” rather than immediate financial pressure, she said.
“Because there wasn’t any financial panic behind their reasons to defer, there is no financial panic once they are making their payments again.
“I think a lot of it gets overblown.”