Fitch: Canadian mortgage performance to remain stable in 2020

by Steve Randall18 Dec 2019

Canadian mortgage lenders shouldn’t worry too much about the performance of their loans in 2020 according to a new report from Fitch Ratings.

The firm says that performance should remain solid next year as strong employment, projected income growth, and low interest rates support mortgage performance across North America.

For Canada specifically, a slight increase to 0.3% is forecast, but this is near historic lows.

Canadian mortgage professionals may experience a sluggish pace though with Fitch calling for growth of just 1% due to affordability constraints and the continued impact of the B-20 lending restrictions.

With CMHC continuing to reduce its exposure to the market, smaller banks and non-bank lenders will find more financing challenges, reducing the overall availability of mortgage credit.

Home prices are expected to rise about 1% over the next two years on a nominal basis but real home prices will decline. 

US mortgage market

By comparison, although the US mortgage market is supported by the same solid fundamentals of the Canadian market, Fitch expects arrears of at least 3 months to increase to around 1.5%, still low by historic standards.

The firm calls for US home price growth of 3%, just above CPI inflation, supported by solid job growth, a high household savings ratio and low mortgage rates, but tempered by slower GDP growth, cooling home prices in higher priced markets, and affordability constraints.

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