The average national household debt-to-income ratio has decreased since the onset of the pandemic, despite the growth of high-value mortgages.7 However, indicators such as the household debt-to-income ratio and saving rates tend to mask the actual burden of mortgage debt. This is due to the uneven economic recovery across different sectors.

To shed more light on the financial state of consumers taking out larger mortgages, we studied the distribution of loan-to-value (LTV) ratio of the newly originated mortgage loans. According to the Office of the Superintendent of Financial Institutions’ Mortgage Loans Report (E2)8, the share of newly originated mortgages with an LTV ratio of 80% or more stood at 16.3% in the fourth quarter of 2020. This is very close to the levels in the same quarter of recent years.

This implies that, with house prices soaring across the country, most homebuyers were able to increase the amount they put down in order to continue meeting the 20% down payment threshold. Nevertheless, this suggests that new homeowners during the COVID-19 era now face a heavier mortgage debt burden relative to their income than those who purchased their home before the onset of the pandemic.

Overall, we observed growth in the divide between those who can obtain mortgages and those who cannot over the course of the ongoing pandemic. It is important to note that homeownership is not the only way to ensure all Canadians have a home that they can afford and that meets their needs.

New mortgage holders since the beginning of the pandemic tend to have high credit scores and take on larger mortgages. This contributes to rising house prices and prevents a growing number households from accessing the housing market. Also, it results in an overall stock of mortgage debt being held by a more concentrated group of mortgage holders. This increases the housing finance system’s vulnerability to disruption.

Additionally, those new homeowners now face a heavier mortgage debt burden (relative to their income) than those who became homeowners before the pandemic. This exposes the housing finance system and the housing markets to their ability to service their debt in the coming years.

This analysis uses data from the credit rating agency, Equifax Canada, covering approximately 80 to 85% of the mortgage market. CMHC did not access or receive personal identifiable information on individuals in producing this analysis. All figures are sourced from Equifax Canada unless otherwise stated. Mortgage information is currently available from Equifax Canada starting in mid-2012 while other credit information is available from 2006. As the amount of coverage increases significantly between 2012 and 2014, indicators that use the average are more reliable. Unless otherwise noted, dollars are not adjusted for inflation.

About CMHC Analytical Briefs

This analysis is part of our new series covering various research topics. We’ll let you know about the latest housing trends, patterns and symptoms in the data when you need it. You can use the information to influence decision-making to help accelerate affordability.

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