Monday Market Minute | Mar 30, 2020

Mortgage deferrals hit 10% of all Canadian mortgages in two weeks — MICs face operational stress

What Moved

By the end of March, Canadian mortgage deferrals had already reached approximately 10% of all outstanding mortgages — a figure that was climbing daily. The Big Six banks processed hundreds of thousands of deferral requests, and MIC lenders reported deferral rates ranging from 8% to 20% depending on portfolio composition. Lenders with heavy exposure to hospitality, short-term rentals, and construction-phase projects faced the steepest stress. CMHC issued guidance supporting deferrals as a stabilization tool. The federal government expanded CERB eligibility, attempting to keep income flowing to households.

Why It Matters

For MIC investors, the deferral wave had a direct impact on cash flow distributions. Deferred payments meant reduced income to fund unitholders, even though the principal remained intact. The distinction between a liquidity interruption and a credit loss became the critical analytical question. Funds with strong cash reserves and diversified collateral profiles were better positioned to weather the pause. Funds with concentrated exposure and thin liquidity buffers faced difficult choices.

Signal to Watch

Monitor whether deferral rates stabilized or continued accelerating through April. The trajectory, not the level, would determine whether the mortgage system held.

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