Mortgage defaults after COVID-19 could look different than 2008, says economist

Mortgage defaults after COVID-19 could look different than 2008, says economist
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TORONTO — A Bank of Canada economist says the current economic recovery could be different than the recovery from the financial crisis of 2008.

Bank of Canada Director of Financial Stability Mikael Khan said that while the employment rate has fallen due to the pandemic, house prices are recovering and keeping homeowners from filing for insolvency.

Khan, who spoke at the Move Smartly Toronto Real Estate Summit on Monday, has been studying mortgage defaults.

He said breaks from mortgage payments have bought home owners some time to get back to work amid the COVID-19 pandemic and economic downturn.

Khan 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.

Bank of Canada research found that while the wildfires caused a bigger spike in employment insurance filings than the 2008 recession, the EI trend reversed much faster after the fires than in 2008.

This report by The Canadian Press was first published July 20, 2020.

The Canadian Press

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