The big six Canadian banks have already authorized customers to put off payments on more than $180 billion in mortgages and home equity lines of credit because of the coronavirus pandemic.
Toronto-based CIBC reported it had offered approximately 108,000 customer accounts the opportunity to defer payments on around $35.5 billion in Canadian residential mortgages, or about 16 per cent of its domestic real estate-secured lending.
Similar numbers were announced by the other Big Six members this past week, with the banks reporting they’d permitted payments to be deferred on more than $180 billion of Canadian residential mortgage and real estate-secured loan balances during the three months ended April 30.
That total represents more than 14 per cent of the $1.24 trillion in residential mortgages that chartered banks had on their balance sheets as of March, according to Bank of Canada’s numbers.
The Canadian Bankers Association said 13 member banks have allowed more than 720,000 Canadians to defer or skip a payment as of May 27, representing around 15 per cent of the number of mortgages in bank portfolios.
There are billions more in loans on which international clients could defer payments on. The Big Six are also offering deferrals on Canadian credit cards, personal loans and commercial mortgages. Add it all up and the total amount of debt on which the Big Six have offered payment deferrals is more than $300 billion.
Mortgage deferral periods last up to six months, yet there is no guarantee the economy will bounce back to pre-pandemic levels by the fall.
This is all comes while Canadian economic growth plunged 11% in April as many parts of the Canadian economy was shut down to fight the health pandemic. It is expected that the GDP figure on an annual basis will be a decline of more than 40% in the second quarter.
Economically, Canada has a big hill to climb to get out of this mess, as the economy opens back up if consumer spending doesn’t dramatically increase we expect the Bank of Canada to implement negative interest rates as the Central Bank is running out of tools to stimulate the economy.
