Chartered banks saw mortgage originations grow by 11% in the third quarter, a growing percentage of which were uninsured mortgages.

Comparatively, non-bank lenders, including mortgage finance companies, trusts and insurance companies, saw mortgage activity rise 4%, according to the Canada Mortgage and Housing Corporation’s (CMHC) recently released Residential Mortgage Industry Dashboard.

The main driver of mortgage debt for chartered banks came from uninsured purchases of new property (typically meaning those with a down payment of more than 20%), which totalled $58 billion worth of mortgages in the quarter. That’s an increase of 60% compared to the same period last year and nearly double the volume from 2019, CMHC said.

Over a quarter of those mortgages had a Total Debt Service ratio above 40% vs. 6% of insured mortgages, CMHC added. The TDS ratio refers to the percentage of a borrower’s income that is needed to cover housing costs plus any other monthly obligations, such as credit card payments and car payments.

“Refinancing also contributed to the increase in mortgage debt (+16% year-over-year) as mortgage borrowers capitalized on the low interest rate environment and added equity due to house price increases,” the report noted.

Arrears continue to decline

Meanwhile, mortgage arrears—those that are behind payment by at least 90 days—continued to drop for all mortgage lenders.

CMHC released second-quarter data for this metric, which shows a drop in arrears to 0.18% for chartered banks (from 0.26% a year ago), a decline to 0.12% for credit unions (from 0.18%), and to 0.20% for non-bank lenders (from 0.28%).