Mortgage, Money and Dream – Our thoughts on Canadian Mortgage Market
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Apart from Alberta, numbers of mortgage defaults or payment misses have remained steady for last two years. Average Canadian mortgage arrear rate has stabilized close to 0.3%.

Mortgage in arrear

Mortgage in arrear - long term chart

Actual mortgage rate stayed almost flat during this period. That suggests a close correlation between the two – interest rate and default rate.
Actual five years fixed mortgage rates offered by brokers

If the relationship truly exists then a raising mortgage rate will push arrears up. That will reflect on the lender’s balance sheets. As a result of the loss, interest rates may not go up drastically but the loss and higher risk from arrears will raise the lending standard.

The next question is when will rates go up?

The answer may be – soon.

CAD USD ratio and Canadian inflation
There is a close inverse relationship between USD-CAD rate and Canadian core inflation rate. A weakening Canadian dollar will finally push inflation higher and BoC target rate will follow.