Slowing insolvency growth has been driven by government and industry initiatives such as financial aid and mortgage payment postponements, said Mikael Khan, director of financial stability at BoC.
“The fact that deferrals have been available is really, really important,” Khan told The Canadian Press. “Ultimately what matters most when it comes to defaults is people having a job, having their incomes. What the deferrals are doing is they’re essentially buying time for that process to unfold.”
These developments accompanied noticeable growth in the mortgage segment, along with a more modest uptick in household debt. Data from the central bank showed that overall mortgage credit stood at a record high of $1.68 trillion in May with a 6% annual increase, while household credit was at $2.29 trillion with 3.6% year-over-year growth.
Khan said that the market should not lose sight of the possible dangers once the benefits have run their course, however.
“When it comes to bumpiness in the recovery … this question that has been in the background of most of our discussions is, ‘To what extent will we see defaults or insolvencies?’” Khan said. “I think it’s reasonable to expect some sort of increase. What we’d be concerned about, there, is a very large-scale increase.”
MBN
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