By Paul Vieira


OTTAWA--The share of mortgages in arrears at Canadian nonbank lenders gradually increased in the third quarter from a year ago, according to Statistics Canada data issued Tuesday.

While at a relatively low level, the data help illustrate some of the strains households face in a high-rate environment. A Bank of Canada quarterly consumer survey released this week indicated that one in four consumers reported at least one characteristic of financial vulnerability, such as being unable to cover an unexpected expense running hundreds of dollars, or frequently running out of money before the end of the month.

"Many households, including mortgage holders facing renewal in the coming months, continue to believe that past interest rate increases will impact their spending," the survey said, adding that about two-thirds intend to curtail expenditures.

According to the Statistics Canada data, the share of mortgages in arrears issued by nonbank lenders rose to 2.43% in the third quarter, an increase from 2.30% in the prior quarter and 2.12% from the comparable year-ago period. The data-gathering agency categorizes mortgages in arrears as loans with overdue payments at the end of the quarter.

Data from the Canadian Bankers Association--which represents the country's biggest chartered banks--indicates the share of mortgages in arrears was at 0.16% at the end of Sept. 30, or the third quarter.

Statistics Canada's figures cover mortgage loans issued by companies such as credit unions, mortgage-finance companies, insurers and private lenders. As of the third quarter, non-bank lenders had mortgages outstanding of about 390 billion Canadian dollars, or the equivalent of US$290 billion, representing about a quarter of Canada's mortgage market.

Nonbank mortgage lenders generally provide short-term loans with higher interest rates to borrowers who don't qualify with the country's big banks, according to Canada Mortgage and Housing Corp., the federal housing agency.

There has been growing unease about a wave of mortgage renewals in Canada, totaling about C$700 billion, starting this year and next at higher rates. Unlike the U.S., Canadian lenders tend to issue mortgages in short terms, such as five years. Business owners surveyed by the Bank of Canada indicate they fear sales could weaken over the next year as consumers pay more in mortgage costs.


Write to Paul Vieira at paul.vieira@wsj.com


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01-16-24 1450ET