A Typical Canadian Mortgage Went From Less Than $300k to Over $600k In Five Years

Soaring Canadian real estate prices have made it “normal” to borrow supersized mortgages. Mortgage distribution data showing the size at origination has shifted to the right. Low rates and higher home prices have facilitated households borrowing a lot more to buy a home. Just five years ago, the largest segment of borrowers had been borrowing less than $300k to buy a home. Now the largest segment is over $600k as the only risk buyers see is not owning a home.

Canadians Are Borrowing A Record Share of Large Mortgages

The share of mortgages with large outstanding balances at origination hit a record. Balances greater than $600k represent 23.8% of mortgage originations in Q4 2021, up from 19.0% a year before. Five years ago, this share had only been 11.6% of mortgage debt, so it’s more than doubled since then. The over $600k crowd is now the largest distribution range for new mortgages. Needless to say, this is a record for Canadians borrowing in this range.

The trend towards larger mortgages can be seen in the $400k to $600k distribution range as well. Originations in this range were 23.5% of mortgages in Q4 2021, up from 22.5% a year before. It’s also a new record and a substantial climb from the 17.7% of mortgages five years ago. It’s worth taking note both of these ranges have made similarly large shifts over the same period. The ranges used just five years ago may have to be consolidated and moved higher soon.

Canadian Mortgage Origination Distribution

Canadian mortgage distribution by the dollar size at origination in Q4 for each respective year. Expressed as a share of total originations in the quarter.

Source: Equifax; CMHC; Better Dwelling.

Smaller Mortgages Were Common, But Have Fallen To A Record Low

Smaller distribution ranges used by Canada’s CMHC are starting to hit record lows. Balances between $300k and $400k represented 18.1% of mortgages in Q4 2021, down from 19.4% five years ago. The originations between $200k and $300k also fell to 19.1% of mortgages, down from 26.0% over the same period. In just five years the latter lost its top spot for most popular distribution range. 

As for those borrowing less than $100k, that fell to 2.8% in Q4 2021, down from 4.7% in the previous month. Half of borrowers needed less than $300k to buy a home five years ago. Mortgage rates were only a little lower back then, but only Toronto and Vancouver saw a surge in demand. Now it’s turned into a national problem.

The distribution of mortgage debt has shifted towards larger numbers recently. Only five years ago, half of Canadians had been borrowing less than $300k, about 3x the median household income to buy a home. Now nearly a quarter are borrowing over $600k to buy a home, over 6x the median income. Many assume the larger mortgages are due to higher home prices, but there’s mounting evidence showing it’s the reverse. The Bank of Canada has mentioned in passing they’ve found buyers pay more to buy a home with extra credit.

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  • Rene Albert 7 months ago

    Does that sound unrealistic to you? There will inevitably be a major correction in the housing market, and may all those greedy investors who drove the prices up lose their shirts in the process…

  • david 7 months ago

    Almost 50% of mortgages are above 400K. Does not sound like people are getting richer, but just more in debt.

  • Old Greg 7 months ago

    Hike away BoC and watch this house of cards come tumbling down… Remember now “you will own nothing and be happy”. RE is one way this will be done to the gullible who rushed in and believed that Tiff McKlim who said rates would be low for a very long time.. So everyone rushed in during the scamdemic bought up everything while the banks were printing their faces off and no one saw the inflationary spiral that was coming and had no idea as to what the banks response to the inflation creation machine would be? It was obvious from the start that when the CPI and PPI would start to run to new highs they would raise rates and of yea this .50bp hike matters not at all and they could raises it 2% in one go and it will not stop the inflation.. Welcome to the fall of empires!

  • JCH 7 months ago

    Just when I think the idiocy in Canada’s housing market can’t go on any more, the corrupt politicians and BoC find yet another way to prop it up some more. So this time, we’ll be living with intense inflation indefinitely, as any serious action against inflation would mean falling housing prices, which would be an existential threat to the 2/3 of Canadian voters who own housing and the banks that fund them.

    But eventually, as our housing prices continue their rise to the moon, the Canadian dollar will collapse and bring us all vastly more pain. So, I’m looking for ways to get money out of Canada & into other more sound currencies. I’m not suggesting anything illegal – this is capital flight on a personal level, voting with my assets. It’s something I think everyone with a (non-housing-based) positive net worth should do – wealth preservation of what you do have, against even greater stupidity & higher taxes/worthless currency to come. Canadian & global debt levels are through the roof, and there must be a day of reckoning eventually.

    So, anyone have suggestions of currencies expected to keep their value better as an upcoming global financial crisis takes hold? I’ve been thinking about Norwegian kroner or possibly Swiss francs, but am concerned about the level of govt debt and lack of anything backing these currencies.

    I’d move a big chunk to physical gold, but it’s not safe to keep at home, & if there’s a bank bail-in in Canada, I’m not sure a safe deposit box wouldn’t be held/inaccessible. I don’t know if there’s a trustworthy non-bank gold storage/depository in the Vancouver area. Physical gold outside of Canada is kind of a nonstarter, re getting access to it when you really need it or finding a trustworthy custodian. I have some paper gold but doubt it’s actually worth anything in a crisis, due to counterparty risk.

    Bitcoin/other cryptos would be a possibility except for the price volatility & scams. Something can’t be a store of value if its price can swing by 20% in a month! Plus I’ve read that a huge percentage of Bitcoin are purchased with Tether, likely fraudulent. So, I have no confidence in it as an alternate financial ecosystem to safely store my assets.

    Real estate in other countries would be a possibility, but haven’t looked into it & don’t know which countries aren’t already in a real estate bubble of their own. (but a little cottage in a Tuscan village certainly has appeal!)

    Love to hear your thoughts! Better Dwelling is one of my favourite blogs for high quality economic research, so thank you!

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