Canadian Borrowing Rates Are Climbing, But Growth Is Slowing

Canadian lenders have started to stall on rising rates. Bank of Canada (BoC) numbers show the effective borrowing rate held for five consecutive weeks by February 15. The stall, rarely seen prior to 2016, also came with deceleration of annual growth.

The Effective Borrowing Rate

The weekly effective borrowing rate is the typical cost of borrowing that week. The number is an index composed of mortgage and consumer rates, and includes discounted as well as posted. The data is from consumer and residential mortgage reports, as well as institutional lenders. The index more accurately reflects what households are paying, as opposed to using a single posted rate. Posted rates are great, but ask someone at your bank how many people pay it? The answer is probably very few, unless they have not so excellent credit.

Typical Canadian Borrowing Rates Are Up Over 11%

The cost of borrowing is stalling at an almost decade high. The effective borrowing rate reached 3.99% on February 15, up 11.14% from the year before. This is the fifth consecutive week the rate has maintained the level. The rate stalled at the highest level since 2009, and shows some hesitation to raise them further. Prior to 2016, it was unusual to see the effective borrowing rate stall this long – higher or lower.

Canadian Household Borrowing Rate

The Bank of Canada’s weekly effective borrowing rate for Canadian households. The number is a weighted average of interest rates on mortgage and consumer credit products.

Source: Bank of Canada, Better Dwelling.

The annual pace of growth is also beginning to decelerate. The 11.14% annual growth rate is 29.49% lower than the same period last year. Prior to that, we’ve seen mostly negative or flat growth in recent time. The growth rate is still very high, but is starting to cool down after sprinting higher.

Canadian Household Borrowing Rate Change

The 12 month percent change for the effective interest rate households faced on Feb 15.

Source: Bank of Canada, Better Dwelling.

The effective borrowing rate is starting to look a little tired. The rate is following an irregular multi-week stall with another multi-week stall. The growth rate is also significantly lower than the same month last year. This may be a sign that consumers can’t take the rate hike, or banks are hesitant due to falling credit growth

Like this post? Like us on Facebook for the next one in your feed.



We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Justin 5 years ago

    The economy is doing so well, we’ve reached a non-regular resistance point for rates. /s

    • Omar M 5 years ago

      It looks lie 4 might just be a psychological level for lenders, not an actual resistance level. We’ll see a 4 handle if the Big Five report “good” results this week.

  • Omar 5 years ago

    You should look into the spread between a variable and 5 year. I’ve seen a lot of reports on the 5 year coming down, but nothing on variable rates falling.

    • David Brown 5 years ago

      I don’t believe variable rates have fallen since last Spring.

  • CanadaSucks 5 years ago

    Bank of Canada cannot reduce rate because it will send the message that Canada economy is weak and could send the Canadian dollars lower versus US dollars and creating broader wide inflation in Canada. Look at AUS dollar for an example of that.

    Bank raising mortage rate because they need to raise CPG rate to attract saving because some Canada are late or not paying their mortgage anymore by cause or raising Canada inflation:food, municipale taxes, Carbon taxes.


    Looks like Better Dwelling is running out of ideas. I thought the world was supposed to end by now.
    Entitled lazy people wanting the economy to fall apart thinking they have it all figured out.
    If the banks drop rates then everyone here will be waiting for the even bigger crash to come. 3 years later I will be reading their comments here just like I’ve been doing for past 3 years.

    • T Mikas 5 years ago

      If you look back at their early articles it talks about the inflation of credit, and how prices are going to fall. They only started talking about the coming credit contraction.

      Clearly you’re not in the real estate industry, otherwise you would know about the increasing power of sales, developer defaults, and falling private mortgage volumes. All of these things precede a significant price drop.

      Funny how everyday schmucks that don’t understand investing outside of real estate are always like “it’s been a year, and prices didn’t correct! They went up for 20 years!” That’s because you’re willfully ignoring that prices are down 7% (detached rolled back to 2016 levels), and the fact that these declines last for 6 years on average, and usually take 15 years to return to the peak.

      • SUMSKILLZ 5 years ago

        Also seeing some doubling up, aka a single family dwelling all of a sudden gets occupied by two families. The tell tale signs are way more garbage on garbage day and a doubling of the number of cars in the driveway/street/lawn, way more kids playing out front…and of course city bylaw officers poking around a few months later.

      • Tudval 5 years ago

        So, other than the high end detached prices in Vancouver and Toronto, what else has fallen? And speaking of the detached market.. 15 years to recover “on average”.. what average , there is only one example, in the ’90s, and this ‘schmuck’ always saud that the long period of recovery back then resulted in incredible bargains (anybody noticed at the time?) and the fast runup that followed was the result of a very underpriced market.. Sure, it overshot a little, just like it did in the late ’80’s, but watch what happens next, TO and Van are not the sleepy cities they were in the ’90s,

      • Tudval 5 years ago

        Let’s look at the claim that there were three previous corrections in the Toronto housing markets, each lasting 7 years, so this one will also last that long. First problem: it hasn’t been even established we are in a correction. Some prices are down and others are up compared to 2 years ago. The averages are all up. Sales are down due to government imposed tighter credit conditions, but arguably there is NO oversupply, which is always a characteristic of a significant downturn, there is still significant in-migration and no real new supply of land. All these factors are in stark contrast to the previous corrections. We may look back at this one and conclude it was just hickup, more like the 2008 or 2013.

      • Tudval 5 years ago

        And no recession so far.. the 90’s were a prolonged recession due to flight of capital towards the emerging markets and former communist block. Nothing like that in sight, perhaps the reverse might be happening.

    • Tudval 5 years ago

      In the mind of a ‘bear’ (a misnomer for a speculator who is wrong most of the time) .. low rates = bad economy = crash.. good economy=higher interest rates = crash.

    • SMH 5 years ago

      “Entitled lazy” bears?? The only entitled lazy ones are the people who bought a home, had the value of their property inflate to ridiculous levels while they sat around and did NOTHING. But sure, of course you’re all true millionaires, because you made your millions on productive work instead of an inflated asset right?? Hmmm what’s the definition of both entitled and lazy again…
      Also love your name, methinks thou protest too much 😉

      • Tudval 5 years ago

        “Did nothing”?? man.. you should look at pictures how our cities looked 50-60 years ago.. Some of the best areas in Toronto were cow fields.. even 25 years ago, so people went to work , they built neighborhoods which now look highly desirable to 99% of the people in the world and YOU think you are entitled to get what they built for whatever you consider can afford (after your monthly restaurant bills, wifi and trips to tropical islands etc…) and you couldn’t be bothered to commute or build a new neighborhood or city.

        • SMH 5 years ago

          I’m not speaking about developers, which now I think you probably work for one. I’m talking about all the boomers who bought a house and now are fake millionaires thinking that the party will go on and that they can pass on their house to a foreigner who will pay what their house is “worth”.

          But yes, praise be the selfless developers who are making this country great again. Can’t wait until they whine enough to open up the greenbelt to help out all the little guys.

      • RE EXPERT EXTRAORDINAIRE 5 years ago

        Yes entitled lazy bears.
        You can fight it all you want and wait for the big crash to make your dreams come true if that’s what floats your boat. I’ve made money in small real estate investments since 2001 like many and I have taken that money and am building a business for cash as we speak. Now I have properties and a business. I have never bought a property and thought it was a good deal. I can’t believe how much money it takes to start a business either.
        You can fight the system or you can make it work for you. There are risks in anything you do such as buying a home you feel is overpriced, starting a business etc.
        So far sitting around waiting for the crash seems like it’s been the worst risk since all this money has been missed by many.
        No doubt some areas have dropped in price and they may keep dropping however other areas have gone up.
        Where you decide to buy is up to you and you have to figure out what is best for the times but if interest rates roll back and the government tries to boost the economy with real estate sales be expecting to see higher prices.
        With sales down but population increasing what do you think will happen when sales start to rise after a year or 2 of slow sales?

  • Victor 5 years ago

    It is back to 2009 levels. Congrats to all who need to borrow to buy RE (including me), today we have prices 2-3 times of those in 2009 🙂

    • Big Joe 5 years ago

      Just a matter of time before prices fall further. At least where I am (Brantford) and my budget range ($450K>) prices have already dropped $20-30K since I sold my house (July 2018) everyday there is new Price Reduced & Back On Market showing up. and its not even spring.

      Hold on. Its coming.

  • Tudval 5 years ago

    A very long-winded argument, with the purpose of hiding the reality, which is that borrowing costs are going down contrary to your hopes. Long bond yields down 0.6% in the last 2 months. short term rates stalled and likely to go down before the end of the year, while the economy is still growing. A new thinking is permeating in the highest financial circles, that we may be able to tolerate low rates and slightly higher inflation for longer, perhaps for far longer than previously thought… What that means for the real estate market, oh well, not good news for bears, no crash, damn!

    • Sing Pao 5 years ago

      If you’re a professional, check your inbox for bank reports this week. Big banks have been revising growth forecasts that you’re so rosy about.

      If you’re not a professional, that explains why you’re a few months behind. Dumb money always lags the trend.

      • Tudval 5 years ago

        LOL.. professionals were telling me in the ’90’s that real estate will never go up again.. not one, many.. Well, this dumb money got in to the tilt and rolling in it.. just trying to do a public service, contrary to what this site is about.. But don’t listen to me.. ‘ a few months late’ you say.. are you talking real estate of Netflix?

  • Tudval 5 years ago

    We are going into a goldilocks period, brought to you by Trump’s re-election campaign and despite OUR best efforts, Canada will be dragged along. The government tried to ‘help’ by not letting buyers get into the market, but can only hold on to this failing concept for so long before pressure on them to relax their regulation mount…. growing economy, growing population, tight housing supply are being met with falling sales and building starts.. are you kidding me?

  • Tudval 5 years ago

    In the mid-90’s, the price of a detached house in Toronto’s fine neighborhood of Leaside was 10-12 times what it was 30 years before. Surely prices could not go any higher, for decades, or ever.. the Dow was reaching astonishing new highs..5000.. while gold was languishing around $300… too late to invest all the young people were crying. The new generations will have no opportunity, everything was already scooped up. Ring a bell? But not everybody listened, lamented and cried foul.. some still invested and hoped.

    • Alex Beis 5 years ago

      In the mid 90s prices had already gone down 50% from the peak… As a Realtor I see prices dropping in every GTA market other than Toronto Proper Condos. Even those have slowed down. There is a glut of inventory coming on line in the detached and townhome market in the GTA suburbs. Precon condo sales have slowed down significantly and the number of assignments are at a record. Some buildings have 20% of their units on assignment. Ive seen agents in 200 unit buildings with 6 units of their own on assignment. If you think the party will continue then buy some more peak priced real estate. Otherwise stop misinforming people.

Comments are closed.