Well before Coronavirus, Canadians owed an average of $24,000 in non-mortgage debt, including credit cards, loans and lines of credit. With delinquency rates marching higher for much of 2019.
On March 17, the banks announced a program that allows customers facing financial hardship as a result of COVID-19 to defer payments for up to six months.
Mortgage rates, which before coronavirus were headed downward, reversed course and are now headed upward. With Canadians losing their jobs, lenders are building a bit higher of a risk premium into their mortgage rates.
In general my suggestion is: keep paying your mortgage if you can. Most banks have said they will defer for up to six months but all those funds are tacked onto the end of the mortgages. So there is no free ride here.
If you have to defer, once you’ve managed to get through to your lender, you’ll likely only be approved for a payment deferral if you’ve lost income due to the COVID-19 pandemic. So, if you’re still working and can afford your mortgage, don’t attempt to get a deferral. Not only will you likely be wasting your time and that of the overstretched lenders, the program should only be used as a last resort.
Every lender will be different in how they manage it. Ones with deep pockets may allow for the deferral to continue until renewal, when they simply renew with the higher balance. Others may structure a repayment plan. Again, this is uncharted ground for the lenders, so each will all approach it differently.
To be clear – this is a ‘deferral’ not a ‘loan holiday’. Stay Safe. Stay Home. stayhome staysafe