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missed mortgage payments by people in Ontario are costing more than ever before ing to a report from Equifax Canada Ontario mortgage delinquencies those are payments missed for 90 days or more exceeded $1 billion do in the first quarter of 2024 for the first time ever more on this now this morning is Rachel battalia an economist at RBC good morning to you morning okay so I said the B- word the billion dollar this figure obviously jumping out in this report what does it say to you about the state of finances for people living in Ontario um well it's certainly an indicator of financial stress but I wouldn't say that we are overly hung up on this number just for a couple of reasons um one being that it's the value of delinquencies as a share of total mortgage value that's what's really important to look at here um the total value of mortgages in Canada has risen substantially in the past few years in part because home prices have increased dram atically um and so Mis morgage payment on average will be larger now relative to a few years ago so it's that ratio that's really important to look at here uh likewise the number of mortgages in AAR relative to the total number of mortgages in Canada is another indicator that kind of puts things into perspective uh because population growth in Canada has been so robust um and so so have mortgage originations so uh even if that mortgage delinquency rate had had not not change that much it represents a much larger number in absolute terms today um and actually when we look at today's mortgage delinquency rate relative to the historical context we can see that at the national level and in most provinces today's morgage delinquency rates are actually on par or in some cases lower than they were before the pandemic uh BC and Ontario being the two outliers there okay so what's going on in Ontario then why are we seeing more of these delinquencies in that Province than we are nationally um well in Ontario the share of mortgages that are in AAR in both you know both value and absolute number are notably above those observed in 2019 the situation is staring a little bit better in BC uh tighter labor markets we expect to have something to do with that um but I would lump BC in with Ontario and saying that you know that's where the mortgage delinquency picture has deteriorated in Canada um and it's not surprising at all uh given BC and Ontario households do have to Fork over a lot more of their paycheck to cover uh ownership costs because of the high cost of housing um and the wage differential doesn't really make up for it so households in those provinces do tend to hold higher debt burdens um but you know again for Ontario uh we're coming from a relatively favorable starting point um in the 5 years or so before 2023 the share of mortgages and AAR was maybe half that of the national average so there is space for delinquency uh rates to drift a little bit higher uh before we need to sound any kind of alarm Bells so Rachel I want to break this down a little bit further an estimated 34,000 households in Ontario missed a mortgage payment in the first quarter of this year that is a 23% increase from the first quarter of last year are we looking at a scenario where we will start to see people lose their homes um that's not really something that's baked into our base case at the moment people are shifting their consumption patterns to accommodate those higher interest costs um that's been evidenced by slower spending especially in Ontario and BC and Rising delinquencies among you know other forms of debt like Mis credit card payments and car payments um labor markets aren't also projected to weaken too much more this cycle uh the unemployment rate at at 6.2% at its last reading in May and we're projecting you know just a modest increase to 6.3% this year holding steady into 2025 um that's you know important because the unemployment rate is correlated with mortgage delinquencies um current unemployment rate it's pretty normal rate of unemployment for Canada and is actually on the low side in the context of a recession or a weak period for growth um and so you know so long as people are keeping their jobs this consumption shift away from goods and services and towards interest payments is something that we think people will generally be able to to manage um that's of course assuming that the Bank of Canada won't change course uh anytime soon yeah that's a key factor in this Rachel we appreciate your time and your Insight thank you thank you hey thanks for watching if you liked this be sure to subscribe here or you can check out more your morning videos right here