A Bank of Canada economist says the current economic recovery could be different than the recovery from the financial crisis of 2008.
Mikael Khan, the Bank of Canada’s director of financial stability, said that while the employment rate has fallen due to the pandemic, house prices are recovering and keeping homeowners from filing for insolvency.
Khan said breaks from mortgage payments have bought homeowners some time to get back to work amid the COVID-19 pandemic and economic downturn.
“The fact that these deferrals have been available is really, really important,” said Khan. “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.”
Khan, who spoke at the Move Smartly Toronto Real Estate Summit on Monday, has been studying mortgage defaults. He compared the COVID-19 pandemic to a natural disaster, such as the 2016 wildfires in Fort McMurray, Alta., which also involved a mortgage deferral recovery plan.