Canadian Banks See Mortgage Growth Drop To Multi-Year Lows

Declines in Canadian real estate sales is really putting a drag on debt growth. Numbers from the Bank of Canada (BoC) show Canadian banks held a record amount of mortgage debt in Q3 2018. However, the record amount of mortgage credit is growing at the slowest pace in years.

Canadian Banks Hold Over $1.25 Trillion In Mortgage Credit

Canada’s balance of outstanding credit held at chartered banks reached a new record. The balance reached $1.25 trillion in Q3 2018, up 1.42% from the previous quarter. This represents a 4.32% change compared to one year before. If that number looks a little low, it’s because it’s just chartered banks. This doesn’t include all institutional lenders, unlike our monthly mortgage credit updates.

Canadian Mortgage Credit Oustanding (Chartered Banks)

The total of residential mortgage credit oustanding at Canadian banks.

Source: Bank of Canada, Better Dwelling.

The annual percent change is dropping quickly. The 4.32% annual change in Q3 is 27.15% lower than the same period last year. It’s also the third consecutive quarter growth has decelerated. Considering the effective borrowing rate is now 3.99%, this is very weak growth for this segment. Let’s break this down by province.

Canadian Mortgage Credit Oustanding (Chartered Banks – Change)

The annual percent chage of oustanding residential mortgage credit at Canadian banks.

Source: Bank of Canada, Better Dwelling.

Most Mortgage Debt Is Attached To Ontario and British Columbia Real Estate

The majority of debt can be found in just two provinces. Ontario held the lion’s share of mortgage debt, with $550.44 billion outstanding – 43.68% of the total. BC is the second largest at $213.63 billion outstanding, representing 16.95% of the total. Just the two provinces represent a whopping 60.63% of mortgage debt held at chartered banks. For context, the average sale price of real estate in Ontario made a 0.0% annual change in December. In BC, the average sale price dropped by 5.3%.

Canadian Mortgage Credit Oustanding (Chartered Banks)

The total of residential mortgage credit oustanding at Canadian banks in Q3 2018, by province.

Source: Bank of Canada, Better Dwelling.

Ontario and BC Mortgage Credit Growth Drop To 2015 Levels

Mortgage credit growth has fallen back to multi-year lows in the largest markets. Ontario saw mortgage credit make an annual jump of 5.29% in Q3 2018, the lowest number since Q2 2015. British Columbia’s annual growth fell to 4.31%, the lowest since Q2 2015. Weakness in both regions helped to drag the national number to 4.31% annual growth. This is the lowest national growth has been since Q3 2014.

Canadian Mortgage Credit Oustanding (Chartered Banks – Change)

The annual percent change of residential mortgage credit oustanding at Canadian banks in Q3 2018, by province.

Source: Bank of Canada, Better Dwelling.

There’s provinces worse off – with Newfoundland, Alberta, and Quebec seeing negative growth. Newfoundland saw mortgage credit drop 1.64% from last year, the third negative quarter in a row. Alberta’s balance fell 1.18%, also the third negative quarter, and largest drop since 2009. Quebec also saw a 0.32% decline in mortgage balances, the biggest decline since Q2 2009.

Mortgage growth across the country is decelerating very quickly. Not totally surprising, since most mortgage debt is concentrated in two provinces. However, it’s worth noting the impact of rising rates. Outstanding mortgage credit at Canadian banks has fallen back to pre-2015 interest rate cut levels, and is still dropping.

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  • LD 5 years ago

    The real reason they’re cutting 5 year rates – soft demand.

  • Ethan Wu 5 years ago

    Mortgage rates dropped in the US, and home sales didn’t pick up. Maybe this time is different?

    • Jagdeep 5 years ago

      Rough stat from THIS MORNING. Further signs the end of the credit cycle is here, and it’s not going to be as easy as inflating debt another 100%.

  • Smaug 5 years ago

    What’s with the massive spike in 2011? Was there a data revision? Outstanding mortgage credit could not possibly have been up over 50% YoY in Q4 2011.

    • John 5 years ago

      I think someone did a thing, and it makes it look like there was a huge increase, but it’s actually artificial. BD has talked about it in the past.

      Can someone enlighten Smaug and I? I’d love a refresher on why this chart looks so obtuse.

      • Grizzly Gus 5 years ago

        Taking a guess, but it is just year over year stats. 2009-2010 depressed for sales and small price decline due to GFC. (fewer new mortgages in terms of volume, and less total mortgage for each one) Jump back in prices and sales could cause a 1 year YOY spike.

    • Alex M 5 years ago

      Spike doesn’t make sense at all. Sold my condo in BC in 2012, was the slowest year since 2008, prices were flat with slight decline 0.1-05%, many sellers pulled out until next year. 2011 was only marginally better, judging by other sellers that I know.

    • dirty101 5 years ago

      It was mentioned in a previous BD article. I believe National Bank or some other federally regulated bank took over some unregulated mortgages? Something along those lines…

  • Mtl_matt 5 years ago

    But remember kids, they’re richer than you because they work harder, not because they own the printing press.

  • Gregory 5 years ago

    I sold my downtown Toronto condo in October 2018, renting now…. SO I really hope YOU are RIGHT and the market falls !!

    • Joe 5 years ago

      You notice that BD never say when it the market will fall or how much it will fall by. What BD is doing is merely showing data/stats that the market is poised to fall!

    • Joseph 5 years ago

      Gregory, you’re the essence of greed. I assume you bought your condo prior to the jumps. Then you sold it. You likely made a killing and you’re still greedy to hope the whole entire pile of cards tumbles. Come on man.

      I’m renting right and missed out on the last five to seven years; the years that rewarded the dumb (people who should never have purchased, but did anyway and were bailed out by the increase in dwelling prices), but it’s not a time to clamour for housing to fall. Coming back in line is fine, just don’t be a dink about this stuff. Peoples lives (and the entire econony) are at stake if things fall as you hope.

      • John 5 years ago

        I disagree. Since selling real estate as an investment is the norm and the goal is to make money on an investment, I think Gregory is completely justified in his hopes.

        If you want to be angry at someone, be angry at those who have enabled this situation to begin with.

        But Gregory? He isnt out lobbying for regulation changes, he isnt out intimidating anyone. He is simply making an opposing investment hoping his bet pays off. I dont think there is anything wrong with that and insulting him for his investment because you cant stomach the play isnt justified.

  • Bluetheimpala 5 years ago

    I’ve been busy but my zolo feed and others are still coming in . This is what I’m observing based on listings and solds. Downtown condos and housing is still relatively strong with offers over list but based on my ‘pinching off a loaf’ analysis, I’m seeing the SF price dropping. $950-1000/sf was the norm but there are places popping up in the $600-700/sf range. This is based on list which which is based on comparables and I do not believe we are still in a sellers market, i.e. list low, sell high. A lot of high priced units unoccupied. Housing is peculiar and seems to be heading up in the $1.2 millie + range with a number of over asking solds hitting $100K over…I find this peculiar but these are strange times. I believe old homeowners are trying to weather the storm and sitting tight however the coming storm and the aging population with no income stream can’t sit out forever; they will need to start selling and I believe once we hit a downturn this will be the catalyst, I could be wrong. Condos are coming down per sf from what I can tell.
    Take a look at Brampton and other outer burbs as there are a lot of unoccupied listings and people seem to be dumping; you can easily get an older detached for under $700. I am going to keep watching.
    Don’t listen to the media. Don’t listen to BD, Definitely don’t listen to me. Try to get your own data. You don’t need to be in finance to track prices and sites like Zolo have improved visibility. Tock. BD4L.

    • Joseph 5 years ago

      Blue, Ottawa is definitely in a sellers market. Stats collected combined with visually seeing it both point towards that.

      With that said, Ottawa was super slow to warm up to the climate Toronto and Vancouver had already had since 2012-ish.
      For example, I could pick up a $269k war time house with a basement on Fisher Avenue im May 2017. It’s around June 2017 that things started going nuts in Ottawa. That same house at the moment would easily got for $450k now. I’d even say some people would pay $500k. That’s Fisher Ave resides JUST outside downtown but is close to everything. View across the street is the multiple acreage Experimental Farm which backs on to the Otttawa Botanical Gardens. So the Experimental Farm is HIGHLY likely not going anywhere. Inventory is low across the city so demand is being driven higher.

      I expect the only thing in Ottawa to bring things down to a level a larger number can partake in is an interest rate hike.

      We shall see.

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