Canadian mortgage lenders shouldn’t worry too much about the performance of their loans in 2020 according to a new report from Fitch Ratings.
TORONTO, December 18, 2019 - 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.