After falling at the start of the pandemic, the number of homeowners in financial difficulty rebounded significantly last year, data analyzed by The duty. And the worst could be yet to come, experts warn, if the unemployment rate continues to rise.
Last year, the number of acts of financial difficulty recorded by the Quebec Land Registry increased by 39% compared to 2022, according to the analysis of the Duty. This percentage reaches 49% with regard to the number of notices of exercise received by indebted owners from creditors who threaten to take possession of their property or even to put it up for sale themselves, if the sums owed to them are not promptly repaid. As for property seizures, their number increased by almost 18% to reach 345 last year, a number higher than that of 2019, before the health crisis.
The total number of acts of financial difficulty compiled last year, however, remained lower than it was before the pandemic, which temporarily caused mortgage rates to drop and household savings to increase. A situation that Charles Brant, director of the Market Analysis Department at the Quebec Professional Association of Real Estate Brokers (QPAREB), associates with the many “accommodations” in the payment of their mortgage loans that banks have offered in the past year to indebted homeowners, with the unemployment rate having reached a historic low last year.
“It’s as if we were giving them advantageous conditions. But the banks will always be able to revise their attitude with regard to the evolution of the financial situation of a person who is going to lose their job. That’s where the precariousness” of many owners comes from, notes Mr. Brant. He thus notes that the financial situation of households, more precarious currently than it was before the pandemic, “will be very sensitive to the evolution of the unemployment rate” in the coming months. However, this rate is currently on the rise, he notes.
“We may see more repossessions and court audits by the end of the year,” warns Mr. Brant, who fears an increase in the number of owners having their property seized by their financial institution.
“That’s what we’re going to start seeing, that’s for sure,” also fears the chairman of the board of directors of the Corporation des propriétaire immobiliers du Québec (CORPIQ), Éric Sansoucy.
Data from the Quebec Land Registry also show 3,700 acts of financial difficulty recorded during the first five months of the current year. Of these, 2,550 notices of exercise were sent by unpaid creditors and 154 properties — residential and commercial — were seized by lenders as of 1er May. “We are sinking,” worries Mr. Sansoucy.
“Extremely high” debt
In a report published last May, Canada Mortgage and Housing Corporation economist Tania Bourassa-Ochoa wrote that the mortgage debt of homeowners in the country “could grow rapidly in the coming years” due in particular to the expected increase in property values and changes in the job market. “Indeed, job loss is the most common reason for mortgage defaults,” states the report, which the author spoke to The duty last Friday.
“We are talking about a context where household debt is extremely high at the moment in Canada,” both because of the rise in mortgage rates and the “cost of living,” notes Mr.me Bourassa-Ochoa. She predicts that the level of “delinquency” of Canadians in repaying their loans will exceed “the pre-pandemic level” this year.
In this context, “an increased share of the debt is expected [des Canadiens] “will turn into bankruptcy within the next two years,” the CMHC report notes.
“It took me by surprise financially”
The duty has also spoken with several owners who have been caught off guard in recent years by the combined effects of the increase in their mortgage, the cost of living and the cost of renovations, which has also exploded.
“It’s money completely thrown in the trash,” says Catherine Osteïn, who saw the monthly mortgage payment on the property where she lives with her partner and three teenagers in Old Longueuil increase by $450 per month when it was renewed last October. “We didn’t know that the interest would increase to this extent,” continues the mother, who is for now ruling out the idea of selling her property to reduce her financial burden, as it would probably be difficult for her to find a property she could afford.
“It took me by surprise financially,” confided Chantal, who is struggling to make ends meet due to the increase in mortgage payments she has to make each month for the property she acquired in 2021 in Shawinigan. The owner asked that her last name not be used to avoid making public her precarious financial situation, which has led her to fall behind on certain payments and borrow money from her father due to the increase in her mortgage costs.
Last March, Chantal put her property up for sale before changing her mind when she realized that it would be impossible for her to find a property available on the market for “$250,000 or less,” her maximum budget. “It’s scary, we don’t know what’s coming in the future and my salary isn’t increasing,” the owner says, worried.
“The owners are suffocating”
Several rental property owners contacted by The duty For their part, they said they had no choice but to significantly increase the rents on their apartments or reduce their maintenance to compensate for the increase in their monthly costs.
“Landlords are suffocating. It’s very serious,” says Éric Sansoucy of CORPIQ. “Profitability has disappeared” for rental property owners, he argues.
In this context, tenants risk suffering, since it is when owners of affordable rental housing must sell them that the biggest jumps in rents are noted, he notes. “This has an impact on tenants who are looking for housing,” underlines Mr. Sansoucy, who notes that the increase in interest rates has also “stifled for a long time” the construction of new rental housing in Quebec.
In collaboration with the jData laboratory of Polytechnique Montréal