Canada’s Mortgage Credit Growth Hits Multi-Year High, But It Isn’t What It Seems

Canadian mortgage credit growth is accelerating into the pandemic – despite the lock down. Bank of Canada (BoC) data shows outstanding mortgage credit reached a new high in March. The number also saw one of the highest rates of growth for the segment in years. Despite the optimistic sounding trend, one needs to remember hundreds of thousands of Canadians deferred mortgage payments. The deferred payments mean some mortgage balances are rising due to a lack of payment, helping to boost growth before adding in new mortgages.

Canadians Now Owe Over $1.64 Trillion In Mortgage Debt

The balance of outstanding credit is higher – making a big climb on both a monthly and annual basis. The balance of outstanding mortgage credit reached $1.64 trillion in March, up 0.49% from a year before. This represents a 5.3% increase when compared to the same month last year. The balance is a new all-time record high.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

The growth is much higher than the same month last year, and is the highest level of growth in years. The 12-month increase of 5.3% in March, is 60.6% higher than the same month last year. For year-over-year growth, this is the highest print since November 2017 – over two years ago. By almost any measure, this is very large growth. Considering a pandemic was declared in the middle of the month, it’s almost obscene.

Mortgage Credit Was Projected To Grow Much Faster Before COVID-19

The annualized growth over the past few months indicates even bigger growth was expected before the pandemic. The 3-month annualized rate of growth reached 6.4% in March, compared to 4.1% during the same month last year. This implies the 12-month growth will continue to accelerate at least into April numbers. However, there’s a few things to keep in mind when looking at this growth.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change, and 3 month annualized change, of outstanding Canadian mortgage credit at large institutional lenders.

Source: Bank of Canada, Better Dwelling.

A substantial portion of the growing balance is due to Canadians no longer paying their mortgages. Starting in mid-March, banks began accepting mortgage deferrals from households seeking COVID-19 relief. In the first week of April, the Canadian Bankers Association said half a million, or 10 percent of mortgages, have had payments deferred. The hundreds of millions in missed payments, are helping to keep balances higher. Add interest on that, and that’s already a running start on decent growth.

This trend is likely to continue into next month, although growth should taper. The number of mortgage deferrals processed by May 1 sat at 720,000 – up 44% from a month before. That’s even more people no longer paying, and interest racking up. This could potentially offset the declines in home buying activity. However, keep in mind this is a very different trend in contrast to when mortgage growth accelerates.

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  • Yan 4 years ago

    The overhang is going to be massive, considering how many people are losing their business and used it to secure more property.

  • Terrance Yu 4 years ago

    AirBNB users might as well sell now. They’re looking at three years of issues, according to Air Canada’s optimistic pitch to investors.

    • Poolio 4 years ago

      It’s hard to explain something like this to the average person, because they don’t realize this event punctuates the end of the business cycle – the consequences aren’t entirely in this area.

      Most of the top quants on Wall St. projected a recession would occur around here, due to the corporate debt bubble.

  • Jimmy 4 years ago

    Wow. My numbers show approximately 5 million mortgages in Canada. With 700,000 mortgages in arrears…Sorry I mean deferral. So 14% or more of people cannot afford to pay their mortgage.
    Please tell me I got this wrong.

    • Joe 4 years ago

      That’s correct. We’re excluding the number of mortgages in arrears at private lenders, and quit claims processed.

  • Straw walker 4 years ago

    OMG It’s a ski jump
    Not just personal debt , public debt and corporate debt..
    Many corp. saw lower corp. bond rates as a reason to take on even more different to CDN consumer and mortgage debt.
    Especially oil comp. but now with lower prices and no demand, it going to be interesting to see who survives.

  • Brandon 4 years ago

    I want to be bullish on home prices going up – because thats just what happens because sellers and buyers expect it. But in 2019, that little change to interest rates and the stress directly impacted home prices in BC. People who were/are buying are usually leveraged to death. Unless it becomes easier to get bigger mortgages with less income, or family is still willing to cosign, it just doesn’t seem possible overall.

    My guess is gov’t buys up all the defaulting loans after banks get tired of deferring, artificially removing distressed sellers in the market, manipulating prices flatish. A great middle finger to the first time buyers saving and planning to buy this year or the future, while those same first time buyers are the ones who foot the tax bill for the rest of our lives.

  • Asterix1 4 years ago

    Parents want to sell rental property they have owned for 10 years.

    Any tips? What is a good site/service to use in Toronto to sell without using a real estate agent?


  • C.D.R. 4 years ago

    Bite the bullet and pay the 5% commission (negotiate it down to 4% – 2%/2%).
    After owning TO (rental) property for 10 years, the value has more than doubled.

    If the market were different and still a sellers market, you could do it alone, but now isn’t exactly the time to do it.
    TREB still has the monopoly and the most exposure to the masses.if $ goes up, it goes up
    Interview few real estate agents, do your own research on pricing as well as get comps, set a realistic price and timeline for your exit.

    There were many sellers in USA that weren’t flexible on pricing and chased the price down unable to sell due to over supply and dwindling demand, losing all profit and equity.
    if $ goes up, it goes up, oh well;
    if $ goes down, it goes down and you’re already out – don’t have regrets.

    • Asterix1 4 years ago

      Thanks for the advice. It’s just hard to give 35,000$ (HST included) to RE agents for such a sell!

      – How about going with Purple Bricks (or other?). Then hope that someone shows up to buy. People can still find the property on MLS by themselves. Its on the lake, downtown. Should get views.

      – If a buyer (from RE agencies) calls. Negotiate their cut at 1%.

      Does that seem logical?

      • Dave 4 years ago

        In Toronto, Modern Solution charges 2%, 1% for the buying agent and 1% for the selling agent. Full MLS listing. Just google them.

      • brett 4 years ago

        My suspicion using RealtySellers back in 2004-2005 is that many agents were steering their buyers away from my property, so it didn’t get that many showings. I don’t know if that holds true today, but the old line may continue to steer their clients away.

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