Income replacement programs like the Canada Emergency Response Benefit (CERB) are, so far at least, keeping the debt wolf at the door.
“Government supports and payment deferrals for some of these debts are giving Canadians, to a certain degree, a false sense of security, which is actually allowing them to put off dealing with the debts, even though those debts may be just as bad, if not worse, when the situation ends,” said Keith Emery, CEO of the non-profit credit counselling firm Credit Canada.
But government supports are unlikely to last forever. The CERB expires after a recipient has been on it for four motnhs, for example. And bank programs to allow mortgage holders to defer some payments only buy a few months of relief.
“The mortgage payments are going to start again,” said Alexander. "And then we're going to find out what the real economic toll is because it's when the mortgage deferrals end that you're going to see whether or not there are Canadians that are having difficulty making their mortgage payments."
The Canada Mortgage and Housing Corp., the federal Crown corporation that provides mortgage insurance for most Canadian homeowners, recently told the House of Commons finance committee that it estimates 12 per cent of the country’s mortgage holders had already entered into a mortgage deferral agreement with their bank and that by September, that number could rise to 20 per cent, or one in five.
But those deferrals won’t last forever. Eventually, the bills will come due again.
"I think what we're looking at potentially is sort of what's being termed the deferral cliff, meaning that government supports and payment deferrals end while the economy hasn't fully recovered, or in some cases, for personal consumers, they haven't fully recovered,” said Emery.
“Government supports and payment deferrals for some of these debts are giving Canadians, to a certain degree, a false sense of security, which is actually allowing them to put off dealing with the debts, even though those debts may be just as bad, if not worse, when the situation ends,” said Keith Emery, CEO of the non-profit credit counselling firm Credit Canada.
But government supports are unlikely to last forever. The CERB expires after a recipient has been on it for four motnhs, for example. And bank programs to allow mortgage holders to defer some payments only buy a few months of relief.
“The mortgage payments are going to start again,” said Alexander. "And then we're going to find out what the real economic toll is because it's when the mortgage deferrals end that you're going to see whether or not there are Canadians that are having difficulty making their mortgage payments."
The Canada Mortgage and Housing Corp., the federal Crown corporation that provides mortgage insurance for most Canadian homeowners, recently told the House of Commons finance committee that it estimates 12 per cent of the country’s mortgage holders had already entered into a mortgage deferral agreement with their bank and that by September, that number could rise to 20 per cent, or one in five.
But those deferrals won’t last forever. Eventually, the bills will come due again.
"I think what we're looking at potentially is sort of what's being termed the deferral cliff, meaning that government supports and payment deferrals end while the economy hasn't fully recovered, or in some cases, for personal consumers, they haven't fully recovered,” said Emery.
