Interest payments a dominant component of Canadian debt servicing

by Ephraim Vecina17 Jul 2019

The first quarter of the year saw the highest level of debt interest payments since the end of 2014, taking up a majority of Canadians’ mortgage debt servicing.

According to a recent Better Dwelling analysis of Statistics Canada data, Canadian home owners paid $91.42 billion in mortgage debt payments during Q1 2019 alone, with more than half going ($51.89 billion) towards interest.

The total was 2.04% greater than the volume seen during the quarter prior, as well as 7.30% larger on an annual basis. The amount allocated to interest grew by 13.78% year-over-year.

“Households are paying record amounts on mortgages, but less is going to principal. The amount that went towards principal reached $39.53 billion in Q1 2019, down 0.39% from the previous quarter. The decline was so large, the principal contribution fell 0.17% year over year. Less principal paid down means carrying a larger balance, and more interest.”

Figures from StatsCan’s latest Survey of Financial Security showed that a steadily growing number of Canadian households are finding it difficult to service their debts, mortgages and non-mortgages alike.

Among those who held mortgages, around 4% missed or delayed their bills in 2018. Meanwhile, approximately 11% of those with no mortgages skipped or paid late their payments.

Numbers covering Q4 2016 showed that around 7% of households with debt-to-asset ratios (DTAs) of less than 25% had late or missed payments. For those with DTAs falling in the 25%-50% range, around 11.5% were delinquent in their debt servicing.

Those with DTAs greater than 50% had the greatest difficulty, with 16.1% of these households struggling with on-time payments. Most crucially, Canadian households are now labouring under considerably tighter conditions, as the average DTA nationwide has grown by 4.41% since then.

 

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