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Canada has More Insured Mortgages, but Fewer Defaults than the States

For years we’ve been making comparisons between Canada and the United States. Truth be told, we’ve probably been making those comparisons ever since there was a border went up between the two countries. But in the past five years specifically, we’ve been making comparisons between their housing market that imploded on itself, and our housing market that seemed on the verge of serious trouble. But while we knew that it was a subprime crisis that caused the U.S. housing market to crash, and we knew that we didn’t have nearly as many subprime mortgages, actual numbers have been hard to come by. Until now.

Karine LeBlanc from CMHC clears it all up by saying, “Approximately 70 per cent of Canadian mortgages are insured. In the U.S., during the years preceding the economic downturn in 2008, about 15 per cent of mortgages were insured. Due to prudent underwriting standards and the high quality of mortgage lending, the rate of mortgage arrears in Canada is less than one half of one per cent.”

The U.S. is well back on the road to recovery though. While their home ownership rates hit 69 per cent just before the market crashed, those levels are now back to 65 per cent – a level they haven’t seen since the 1990s. And they’re looking to be dropped another percentage to 64 per cent.

Canada on the other hand, didn’t get in near as much trouble with policymakers stepping up to make sure that our nation didn’t experience the same fate. In their recent report, Comparing Canada and U.S. Housing Finance Systems, CMHC attributes this to the crash already felt around this country in the 1990s.

“While this is often attributed to a traditionally conservative business culture in Canada, an important factor here is the difficult lessons learned from previous banking problems. An example is the economic difficulties in the early 1990s, which included a significant housing downturn,” the report stated.

“Canadian banks therefore entered the recent period of financial stress with better risk-management practices, focused on limiting credit losses, than in previous episodes. This helped to limit their exposure to some potentially riskier sectors and products. For example, subprime mortgages.”

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