The CBA rolled out their September mortgage arrears figures this week. Seems they may be plotting to perhaps reverse course again, as while they were technically up, it was only by a trace amount. For all intents and purposes it remained effectively unchanged from August in Alberta, at a national high of 0.78% (up from 0.67% a year ago).
Seems to be much the story all across this land on Grey Cup Sunday, as most regions remained unchanged, or at most were up/down no more than 0.01%. Nationally the rate remained at 0.42% for the 5th consecutive month, which is down 0.01% from a year ago. We won’t get into all the provinces numbers this time around, you can read the linked to report for your self should you be so inclined.
Instead, to shake things up a little bit I’m going to take a look at the numbers from a bit of a different angle today for Alberta. Rather than just report the rate, we’ll look at the two numbers that compose said rate, the number of mortgages outstanding, and those in arrears… and specifically, how they change year-over-year.
We can only go back as far as 2004 for this, as while the CBA has numbers going back to 1990, the number of institutions reporting has increased over time, and thus when a major one comes online this of course causes a major skewing of the nominal numbers. It’s not a big issue with the rate itself though, as you would expect the new numbers to somewhat fall in line with the previously reporting institutions.
As it doesn’t look like they’ve had any major changes in this regard since mid-2002, we can thus report the numbers from mid-2003 on, but just for presentation purposes we’ll start at January, 2004. Unfortunately for us this doesn’t provide us with a baseline number, as by 2004 the housing market was already starting to amp up, but what ya gonna do?!
Hard to draw any definite conclusions from that graph, but we can see some general trends around the times that the arrears totals start changing course. First we see it in early ’07, as the growth in number of mortgages starts to fall off prior levels, and the number of arrears starts to head up (granted it’s still very much negative at this point.
Eventually arrears hits positive territory, and continues growing until early ’09… and we all know what happens then to interest rates, and the responding goosing of the housing market. At this point mortgage numbers again start trending up, and arrears growth plateaus, and eventually reverses course and starts dropping off.
This was the sort of behavior I was looking for in the rate itself but didn’t really surface. Arrears just by it’s nature is something of a lagging indicator, and it appears that trends and momentum in the underlying figures may play a larger role in deciding the actual rate than I expected. Making it something of a lagging indicator or a lagging indicator if you will.
From here on out perhaps I should start checking in on that year-over-year nominal change in mortgage arrears, it seems to be a bit better barometer for the mood of the market than the arrears rate.
