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July 16, 2021

Rich people more likely to default on mortgages: report

Not, uh, not the best week to be well-off here in North America.

Yesterday, we passed along info in this space that ousted CEOs were having a pickle of a time finding new work, slugging through an executive job market that didn’t care much for their pedigrees or résumés.

Today? We turn to housing. It’s no breaking news that it’s been a tough stretch for mortgages – first for the working class, then the middle class – but the rich were largely able to insulate themselves from such defaults. Liquid assets and the initial job security of white-collar occupations provided refuge from much of the downturn.

Of course, “cyclical” is a nasty term during the recession – it means no one is safe. The affluent, long without the economic pressures facing the rest of the world, are no longer safe.

The New York Times reports that the wealthy among us are defaulting on their mortgages at a rate that “greatly exceeds the rest of the population.”

According to the paper, more than one in seven U.S. homeowners with home loans exceeding $1 million have defaulted on their mortgages. That figure is in stark contrast to the one in 12 sub-million-dollar loans that are defaulted on by the rest of the United States.

“I’ve never seen the wealthy hit like this before,” a real estate source told the Times. “They made their plans based on the best of all possible scenarios – that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”

Indeed, while American defaulters are in “denial” about losing their homes, notes the Times, what are conditions like for the wealthy here, north of the border?

Certainly, there are fewer million dollar homes in Canada – a country with an average home price of about $343,000, according to the Canadian Real Estate Association (CREA) – yet how have the rich Canucks responded to their pricey mortgage responsibilities in rough economic times?

Similar data isn’t immediately available for wealthy Canadian mortgage defaults, but several industry sources told me today that the same problems for million dollar-plus loans “certainly” weren’t as prevalent in Canada as they are in the States.

There may be many reasons for this, surely: the subprime crisis not hitting us nearly as hard as the U.S., or mortgage insurance being a “pillar” of Canada’s strong housing market, according to the Montreal Gazette.

Until we hear for sure, though, we won’t know one way or the other. So, we turn to anecdotal evidence.

Canadians: have you seen more For Sale signs up on plush estates these days, or is this the U.S.’ problem and not ours?

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

James HaversJames Havers

James is the senior editor of MSN Money living in Toronto. He has worked for the Nikkei Shimbun (Tokyo),,, Canadian Business and other publications. Havers turned to journalism after teaching overseas.

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...