Canada

A Third of Canada’s $1.2 Trillion In Mortgage Debt Is In Toronto and Vancouver

A Third of Canada’s $1.2 Trillion In Mortgage Debt Is In Toronto and Vancouver

Canadian real estate debt has been soaring, but we only had a suspicion of how it was distributed. Lucky for us, we’ve obtained a breakdown of Q4 2017 Equifax data from the good folks at the Canada Housing and Mortgage Corporation (CMHC). Over a third of mortgage debt is concentrated in Greater Toronto and Vancouver.

Yasss! We’re Finally Being Optimists… Sort of

The data used is one of the most comprehensive mortgage data sets available, but it’s still missing a bit. As the incentive to buy real estate increases (i.e. prices are rising fast), more buyers flock to the market. Determined to not “miss out” on the profits, many people will turn to private lenders if rejected from a bank. These lenders, which often charge steep rates, are much harder to track.

Private lenders can be big companies, that have detailed risk controls, or a mom and pop that are looking to make a few extra bucks. Either way, they don’t report data to anyone, so the full extent of this form of shadow banking isn’t known. As a result, these numbers are a low, and an optimistic survey of Canadian mortgage debt. Read these numbers as a best case, low-ball estimate.

Canadians Owe $1.2 Trillion In Mortgage Debt

Canadians may have a mortgage addiction problem. Equifax data shows $1.208 trillion in mortgage debt at the end of 2017. If that wasn’t high enough, that number is nearly $300 billion lower than the Bank of Canada’s numbers, but what’s a few hundred billion here and there?

The cities with the highest concentration of mortgage debt are Toronto, Vancouver, and Montreal – in that order. Toronto households owe more than $268 billion, about 22% of outstanding mortgage debt. Vancouver households owe $133 billion, 11% of outstanding mortgage debt. Montreal households owe more than $118 billion, 9.79% of outstanding mortgage debt. That’s 42.79% of all mortgage debt, concentrated in three cities.

Source: Equifax, CMHC, Better Dwelling.

It Costs $7.32 Billion Per Month To Service This Mortgage Debt

That astronomical debt pile requires a huge amount of cash to keep going. CMHC analysts found Canadians have scheduled $7.32 billion in payments per month. Keep in mind this number was only Equifax data, which was lower than the BoC’s numbers. This means this is likely an underestimate of the amount that is needed for debt servicing.

Breaking that down, the same cities top the list for mortgage servicing, just in a different order. Toronto has monthly scheduled mortgage payments of $1.52 billion, 20.7% of the total payments scheduled. Montreal comes in second with $731.9 million, 9.99% of payments per month. Vancouver is in third with $731 million, 9.84% of payments per month. Some of you may have realized that Vancouver has more debt, but lower payments scheduled. The reason is most likely a preference for longer amortizations.

Source: Equifax, CMHC, Better Dwelling.

The concentration of mortgage debt, puts these markets in a vulnerable situation. Toronto and Vancouver, both considered “overvalued” by the CMHC, could experience a price correction. That would wipe out large amounts of equity that has been built up over the years.

Best case scenario, rates rise, and so does the amount of money going towards to servicing debt. This would lead to lower amounts of available capital for productive investments, and consumer spending. That also tends to lead to higher rates of unemployment, and lower home sales… which also leads to a loss of equity. If you don’t see the quagmire we’re in, here’s something more your speed.

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51 Comments

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  • Reply
    Trader Jim 3 months ago

    One thing’s missing from this data set that makes it even worse, Canada is an older demographic. The average age is 42.3, which means the average person bough into the market at the bottom of the real estate cycle (1996, when the average buying age was 22). These people likely have little to no debt on their house, and significant equity.

    Most of this rapid debt growth has been over the past 5 years, which means there’s a disproportionate amount of debt held by young people.

    • Reply
      Bluetheimpla 3 months ago

      Double dicked. The young saddled with the debt. The old have their asset value stripped. Toss in a recession to carve out some more retirement dollars and my father will be working until he is 90 years old and I’ll have a mortgage(s) for the next 50 years. Woot!

      • Reply
        vnm 3 months ago

        Might as well make that a triple, considering median incomes in Vancouver, Toronto, and Montreal rank 18th, 20th, and 22nd in Canada.

        • Reply
          Ian 3 months ago

          Quadruple dicked? The whole country isn’t raising interest rates, and the Canadian dollar is plummeting because three metro areas can’t get their shit together?

          • Bluetheimpla 3 months ago

            lol…commodity prices are increasing which has taken some of the pressure off but I wouldn’t put that much value in demand side..2 (3?) major shale deposits have been found in the last 24 months with Bahrain just hitting the motherload of 80bn barrels. Gold isn’t the safety net everyone thinks as it is 2018 and not 1918. Copper is donesky, I think we have a million years of supply. Rare metals, we have none. I guess asbestos is booming? Poloz will be jacking rates in Q3. Fed needs a neutral rate of 3% and won’t stop, it is a mandate people not ‘What am I going to have for dinner?’ BD4L

      • Reply
        Trader Jim 3 months ago

        Looking at another $1.08B per year on those payments if the BoC gets halfway to their target, and we start paying of mortgages at the same pace as they’re added.

        To put that in perspective, the additional interest paid from last year to this year is the amount of the Federal government’s “Supercluster” investment.

        People could literally be funding a supercluster development every year, but they’re going to be spending it on increased interest paid on mortgages. Mind boggling… then there’s the full hike back to normalization of rates.

      • Reply
        Investor 3 months ago

        What’s going to end up happening is that the government will need to be bailed out of its endless debts. And people too will need being bailed out. The government tries to teach its citizens financial prudence, but look at where the national sovereign debt is at. It’s all hypocrisy.

  • Reply
    Bluetheimpla 3 months ago

    “Either way, they don’t report data to anyone, so the full extent of this form of shadow banking isn’t known.”…probably the only thing that matters in this article. Using the bank/industry numbers is a fugazi. If you look at the south asian and east asian communities I think it is fair to assume there is a lot of community lending. New migrants with no credit history, but hard working and intelligent, that want to put down roots (plus some FOMO). Language and general financial comprehension can be an issue as well as an overall a distrust of the banks. Also back home in places like rural Indian and china, community lending is, in many cases, the only way to get a loan. My point and I’ll squawk it again: we’re fucked if/once the alt/shadow/community banking wheels fall off…lending money is easy when everyone is making it hand over fist. Banks are in the job of lending money and are pretty savvy and is able to mitigate risk through other financial products; your neighbour or uncle is most likely not and will lose everything. If you know anything about these practices please share your experiences. thanks in advance. BD4L

    • Reply
      IOIO 3 months ago

      Community lending is getting their lunch eaten by the big banks. New immigrants have an easier time getting a mortgage than a local. New immigrant or with overseas income? No income verification. Self-employed? 7 years of tax returns.

    • Reply
      MH 3 months ago

      I think you are giving banksters too much credit. Their savvy risk mitigation strategy basically amounts to: “And when it hits for real, taxpayers will bail us out because… because… because we are all in it together people so we should help each other. Here… could you hold this bag for a decade? Owe Canada…”

      • Reply
        Alistair McLaughlin 3 months ago

        “I would urge the Bank of Canada to be really careful with future rate movements,” Wang said.

        Like Poloz needs encouragement to go slow on rates. It sucks that rate hikes are being delayed due to the over-indebted fools. The rest of us are being held hostage to the behaviour of the idiots who insisted on borrowing sub-prime.

        • Reply
          @xelan_gta 3 months ago

          :))) Yep, that was funny how a subprime lender is giving advice to BoC.
          I will post some interesting data about one of those lenders later today on my Twitter.

          Teaser: Balance sheet grew close to 100% between 2016 and 2017

          • Xelan 3 months ago

            Sorry guys, I analyzed more data and it doesn’t look so impressive anymore. 2016->2017 growth 36% but average during last 5 years it’s only 12%.
            2018 data should be interesting but it’s not available yet.

        • Reply
          Bluetheimpla 3 months ago

          Agreed AM, what the F&#$ is he doing! Carney would have let the blood spill in 2016 understanding the longer we delay the worse it will get. What a dud. I was thinking about this the other day and I have a hunch/theory/hope Poloz used the last 2 hikes as a ‘warning’. Figure your shit out or the pain is coming. His speeches essentially support this; BoC isn’t stopping their mandate but bringing in a cooler for a couple of month so people can adjust. Banks are already increasing rates independently to pad their balance sheets. It can’t stop, won’t stop….BD4L

          • Alistair McLaughlin 3 months ago

            Not sure Carney would have done anything different. Poloz cut his teeth under Carney’s tutelage after all. Now, John Crow or David Dodge – those guys would not have panicked and lowered rates in 2014-15. They’d have hiked much more aggressively much earlier in the cycle as well. David Dodge has publicly said as much.

  • Reply
    Mmr 3 months ago

    Lol that explain why Vancouver market don’t crash…they have so low debt…Toronto is higher I wonder why…hmm let me think is it because they have 3 million ppl 😆😆😆…time to stop whining about market crash or you guys will keep going for ever lmfao😆😆😆

    • Reply
      Sammy 3 months ago

      It’s weird that you read and comment on this site every day to complain about how this site is “whining.” Do you not have friends, family, strippers that you can complain about how the world disagrees with you?

      It makes me sad to see someone that needs to see someone complain about a news site, every single day. It seems like you have no one in your life. I hope you find someone, and better things to do than just visit and complain about “whining.”

      I’m bullish on Toronto real estate, I think it’s just getting started. It’s becoming more dense, and value will rise as a result. I chose to use facts to dispute a collapsing market. Not become a troll.

      • Reply
        Mmr 3 months ago

        You are never been bullish. I can pull up your old comment to see how desperate you are for a market crash lol….now bring my personal life for an attack? Good luck getting in to market now when prices are 300 percent higher moron….

        • Reply
          Sammy 3 months ago

          Please do find a comment where I haven’t been bullish.

          • Mmr 3 months ago

            Go find your self and prove me wrong….how about that…only low class ass clown like you do a personal attack…now go back to your basement and fuck your self….

        • Reply
          Alistair McLaughlin 3 months ago

          Sammy’s even more of a perma-bull than you are. The two of you should find another forum. You really have nothing to add here.

      • Reply
        Mmr 3 months ago

        I guess it hurts isn’t it… been doing this for 10 year and I enjoy it 😆😆😆…

        • Reply
          Alistair McLaughlin 3 months ago

          What hurts is that you claim to be a third generation Canadian, yet your command of written English barely qualifies you for writing Nigerian email scams. Were you home schooled by your landlord granddaddy? Or did our public school system really fail you that badly?

          • Mmr 3 months ago

            So now you have to attack my race as well…lmao…what is with This fake white name…I am pretty sure you are either brown or Asian…now jerk off and fuck your cousin….

          • Alistair McLaughlin 3 months ago

            I attacked your race? If that’s what you got out of my comment, then your reading comprehension is even lower than your writing ability. I didn’t think that was possible.

            As for your last sentence, you keep surprising me to the downside. Kind of like Toronto real estate.

    • Reply
      Dumb Dumb Go Complain Complain 3 months ago

      Population is large, too many numbers, not able to compute – time to stroke my ego until I feel better?

      Hey Dummy, shove that population stat up your ass with this point: Toronto also had half of the sales in the country over the past two years. The debt concentration is rapidly rising in Toronto. You’re just too stupid to understand it.

      • Reply
        Mmr 3 months ago

        Yes I know it’s been 10 year….only smart moron like you miss opportunity to buy when prices were dirt cheap…2020 2021 2020 same desperation will go on…

        • Reply
          Dumb Dumb Go Complain Complain 3 months ago

          10 years since what? Prices in Toronto only recovered in real terms in 2008. Buy now, and 22 years you’ll have the same amount of money. Good option Realtard.

          • Mmr 3 months ago

            I am not the who is going to buy but dumb moron like you will buy lose money and then whining about it for 20 more years…

    • Reply
      Carlton 3 months ago

      You know the market will never crash mmr, you’ve been right for 10 years and your gonna be right for 10 more.

      Please give us a break, I read the same idiotic comments every day, regardless of the headline. Even when it reads “ detach homes down 114k from last year”. I see the same shit from you, go away already, you won!

      Toronto prices has not fallen since last year and never will! We got it thx

      • Reply
        Mmr 3 months ago

        I will be gone when I feel like I won…don’t like my comments don’t fucking reply then…no one ask you guys to reply to me….just read and move on…it just fun for me😁…

        • Reply
          GTA Agent 3 months ago

          Now I see why the forum is private, and reserved for the industry. Hard to filter out low effort contributors that are intentionally trying to turn the environment toxic. It’s a shame, since the public should be participating in the discussion.

          • vnm 3 months ago

            Wow, you are as dumb as your post. It’s neither private nor reserved for the industry.

      • Reply
        MH 3 months ago

        No Carlton, let him keep commenting. The more the better. You see, he is playing a very important role here – he is exposing the face of the “Canadian real estate investor”. You’ve seen those highly indebted dildos going around bragging about their five condos calling it “wealth” all the while not knowing a thing about basic math, economy or wealth for that matter.

        Yes, I am talking about those greedy idiots who made housing unaffordable to the many working families in Tor/Van and who will bring it down crashing. Those to whom now Poloz openly caters BOC policy at the expense of everyone else. It’s not going to help, this bunch will be washed out very soon.

        • Reply
          Carlton 3 months ago

          Your right,
          As he admitted he is just a jack ass having fun. That explains 99 percent of his comments.

          Well on the bright side i can ignore all his comments moving forward .

          Who knew bd had there very own troll, he’ s having fun.

          God help us!

          • Mmr 3 months ago

            No you can’t…I bet you will reply to me again and again cause you can’t help it….

        • Reply
          Mmr 3 months ago

          Yes housing unaffordable…lmao…angry bitter and whining perfect for me to come here and make fun…keep it up…or you can ask the admin to block me if it’s too much to handle😁

          • peter 3 months ago

            Mmr. you are the most valuable contributor to BD. see this is a click bait website that earns money by having people stay on longer. You help with that for sure.
            These other commenter fools don’t know anything and BD is laughing to the bank. They are just parrots and we are dragons. Grizz, AM, Blue and others work for BD. they need extra income to pay their utility bills.

          • Grizzly Gus 3 months ago

            Considering most of the commenters here lean to the bearish side. Woudn’t it make more sense if you and Mmr worked for BD to get us commenting more?

          • Alistair McLaughlin 3 months ago

            And our friend Ketchup Chips/Zhang/Frank Diesel shows up under yet another pseudonym. Today it’s ‘Peter’. Tomorrow it will be something else. Always the same post. At least he remembered to capitalize the first letter in the first sentence today, after I pointed out that give-away signature of his a couple days ago.

          • vnm 3 months ago

            Not only that Alistair, he self graduated himself from a nearly extinct garbage scavenger to a entirely extinct dinosaur.

    • Reply
      Tommy 3 months ago

      When you have lots of people like the following, in the market, you know that problems lay ahead:
      https://forums.redflagdeals.com/rental-income-property-good-investment-gta-2192066/

      • Reply
        Alistair McLaughlin 3 months ago

        Ha! $20K loss in operating losses over 5 years, but “after appreciation” he’ll be up $94K!

        Why so conservative? He should aim for $500K appreciation.

      • Reply
        Alistair McLaughlin 3 months ago

        Oh but it gets better! He took out a HELOC on his existing property to buy the new one!

        He owes $430K on the soon-to-be rental, and $365K on the house he’s moving into. I think he should take out a HELOC on the second property and buy a condo on the waterfront. You know, use leverage to maximize capital appreciation like they teach at the Toronto Real Estate Wealth Expo.

    • Reply
      Bluetheimpla 3 months ago

      Yes my friend the epicenter of shadow banking and money laundering is just fine. Fundamentals are in place. Go buy a $4M house with a $3M mortgage on the LM, it will be worth $6M within 2-4 years right?. Xi isn’t calling his capital back. Transparency is not increasing. Government, media, people aren’t starting to pay attention. Housing isn’t becoming an election issue.
      What I find confusing is that you are smart enough to know corrections take months to play out however your continue a daily narrative acting like everything is fine. Not sure who you are trying to convince. At the end of the day:
      只剩下猪和负鼠。你是哪一个?

  • Reply
    @xelan_gta 3 months ago

    Thanks for the stats, I wish you include GTA and GV into the mix and it would be awesome if “Other” category can be broken down further. I understand that you need a source data for that but just in case if you find it in the future.

  • Reply
    vnm 3 months ago

    Ontario’s 2017 GDP was 38.7% of Canada total
    Ontario’s population was 38.7% of Canada total.
    Toronto est. 2017 pop. = 45% of Ont. total pop=
    Toronto GDP = 40% of Ont. GDP

    From the Ont. Finance Ministry 2018 fact sheet, which wholly contradicts the RE industry propaganda that Toronto is an economic powerhouse to justify the stratospheric housing costs.
    In fact, not only do low median incomes qualify Toronto as a “have not” place to live compared to the ROC, in terms of GDP the city underperforms relative to both Ont. and Canada as a whole.
    And that’s in the middle of an extreme asset bubble, with a hugely disproportionate component of the economy artificially inflated, now on the edge of a precipice.

  • Reply
    @xelan_gta 3 months ago

    Fellow bears, I started analyzing impact for +1.75% interest rate increase (BoC planned rate hike amount) along with B-20.

    Here are the results so far:
    Purchasing power of all new buyers in Toronto will drop by 27% over the next 2 years
    Debt Service Ratio of existing homeowners will increase by 14% over the next 2 years

    Link to all calculation and sources (hopefully you will be able to open it):
    https://mobile.twitter.com/xelan_gta/status/994089859856961537

    Taking into account all other risks like, extreme indebtedness, further policy tightening, huge amount of speculation, potential recession in the short term it would be a miracle if RE will be able to survive that intact.

    On the other hand what potential tailwinds do we have for RE? 3% YoY income growth, untapped borrowing and savings?
    Only borrowing makes sense since people still have a lot of equity but that will increase indebtedness even further which is already highest in the world and the main concern of BoC.

  • Reply
    JJ 3 months ago

    It seems to me that the only way this keeps going is continued borrowing against existing home equity.

    Barely any first time buyers have cash down payments at these price points. And move-up buyers require FTBs to fund their next moves.

    With rent controls and potential airbnb regulations to come, there will be some headwinds for condos which are the last pillar holding up the image of our housing market.

    But this will take time. We’re doing relatively well economically so without mass unemployment or rapid unplanned rate hikes, I just don’t see any major price corrections. This appears like it’ll be a slow melt. That being said, desirable neighbourhoods are still doing well. I want to live in South Leslieville and prices are still doing great. So the correction in the burbs hasn’t helped people like myself who want to live in the city proper.

  • Reply
    James Wolfe 3 months ago

    What a mess, housing bubble, stock market bubble, record debt levels, personal and government, greedy PS unions, baby boomers…POP, its coming…will be fun to watch from the sidelines…suckers…lollllllllllll

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