More people in Alberta are falling behind in paying their mortgages — a trend that is expected to continue throughout this year.

A mortgage symposium in Calgary on Thursday heard that 55 per cent of mortgage defaults in the country are due to people being “overextended” with nearly 80 per cent of those defaults taking place in the first three years of a mortgage.

“It’s an alarming statistic,” said Brian Bell, vice-president of products and marketing for AIG United Guaranty, at the symposium, organized by the Canadian Association of Accredited Mortgage Professionals.

He said the main causes for mortgage default after overextension are job loss, reduced income and divorce.

The highest probability of default was for single-person applicants, at 75 per cent, followed by first-time buyers.

“It’s much easier for them to get over-extended,” said Bell of t he single-person borrower.
Bell sai d t he Canadian housing market had been running for about 12 years in a boom market. But that has now changed with unemployment numbers rising, house prices falling, and defaults increasing.

According to statistics from the Canadian Bankers Association, the number of mortgages in arrears in January increased to 14,024, representing 0.36 per cent of all mortgages with the country’s major banks. That’s up from 10,100, or 0.27 per cent, in January 2008.

Alberta has seen a spike in the number of mortgages in arrears. The association data show 2,168 in January, or 0.45 per cent of the total, compared with 941, or 0.2 per cent, in January 2008.

The number of mortgages in arrears in the province has been increasing from a low of 649, or 0.14 per cent, in May 2007.

“Considering the Alberta economy has been slowing and a multitude of job losses has been reported in recent months, the increase in mortgages in arrears is not unexpected,” said Richard Corriveau, a regional economist with Canada Mortgage and Housing Corp. in Calgary.


But the increase has to be put in context. The numbers have risen from extremely low levels. It is also important to consider the ratio of arrears to total mortgages, which remains low, said Corriveau.

“If we use the February 1997 period for comparison, we can see that 0.69 per cent of mortgages were in arrears at that time,” said Corriveau. “In that context, we can see that mortgages in arrears are in a much healthier position in Alberta than they were through the mid-1990s, a period when the Alberta economy was expanding rapidly (with) 6.8 per cent growth in 1997 and employment growth was averaging three per cent annually.”

Al s o Th u r s d ay, t h e CMHC launched a consumer outreach campaign to help borrowers understand the importance of working with lenders to find manageable solutions if they are facing financial difficulties in repaying their mortgage loans.

It advises homeowners to talk to their lenders at the first sign of financial difficulty, clarify their financial picture both for themselves and their lenders, and stay informed about what options and resources might be available.

In Alberta, the total number of mortgages in arrears has risen every single month since September 2007, according to bankers association statistics.
In speaking to mortgage professionals Thursday, Bell said those individuals who go into default face losing their house, financial hardship, stress and possible bankruptcy.

The earlier mortgage professionals can reach homeowners who are in difficulty the better the likelihood they will be able to stay in their homes, he said.

In Calgary, average MLS sale prices for single-family homes peaked at $505,920 in July 2007 and for condos at $332,237 in May 2007.

According to the website of Mike Fotiou of First Place Realty, unofficial MLS data for single-family home sales for this month to March 25 showed an average price of $424,086, up from $415,568 for the entire month of February. Similarly, condo prices have risen to $281,379 month-to-date compared with $268,971 last month.