Canadian Credit Card Debt Climbed 3x The Rate of Mortgages

Canadian households are cooling on their borrowing but the type of debt may be an important sign. Statistics Canada (Stat Can) data shows household credit climbed at one of the slowest rates in decades in January. The slowdown was primarily caused by slower mortgage debt growth, with credit card debt rising 3x faster. 

Canadian Household Borrowing Picks Up, But Still Unusually Slow

Canadian household debt is rising but more in line with inflation and population growth these days. The balance of outstanding household credit saw monthly seasonally adjusted growth of $8.8 billion (+0.3%) to $2.93 trillion in January. Unadjusted annual growth was 3.4% for the month, a slight acceleration. However, it was still the slowest 12-month change for January going back to at least 1990, but likely way further.

Canadian Household Debt Is Much Slower Than Usual

Unadjusted Canadian household debt growth, 12-month change in percentage points.

Source: Statistics Canada; Better Dwelling.

Canadian Mortgage Debt Rose At The Slowest Rate Since 2001

Mortgage debt represents the vast majority of the total outstanding balance. Households saw seasonally adjusted monthly growth of $1.1 billion (+0.1%) to $2.17 trillion in January. Unadjusted annual growth was just 3.4%, marking the lowest rate since April 2001.

Canadians Slow Mortgage Borrowing, Turn To Consumer Credit

Annual growth rate of unadjusted household credit broken down by mortgage and non-mortgage (consumer) balances.

Source: Statistics Canada; Better Dwelling.

Canadians Are Scrambling For More HELOC & Credit Card Debt

One surprising shift is borrowing of non-mortgage credit, which is suddenly in vogue. Seasonally adjusted monthly growth was $3.5 billion (+0.5%), pushing the balance to $750.3 billion in January. The unadjusted annual rate growth rate was 3.4% for the month.

According to the agency, home equity and credit card debt were significant contributors. They found home equity credit (+$0.9 billion; +0.5%) rose nearly as much as mortgages over the same period. Credit card debt (+$1.1 billion; +1.1%) was also huge—rising the same dollar volume as mortgage credit, advancing at 3x the rate to accomplish that move. 

By itself, rising non-mortgage debt sounds like a bigger problem than it normally is. Annual growth is roughly at the same level it was around 2018, when mortgage debt wasn’t out of control. This is the type of credit that fuels consumption, tending to drive economic growth in productive areas. 

However, this isn’t normal times so the impact is a little more mixed with context. Households are increasingly resorting to consumer debt to close the gap between inflation and a lack of wage growth. A problem that may not be totally apparent since homeowners are tapping the massive home equity windfall just delivered. It also provides more context to the RCMP’s concerns that younger households unlikely to ever own a home, may have a destabilizing effect for the country

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  • Scott 2 months ago

    “When you ain’t got nothin’
    You got nothin’ to lose…”

  • [email protected] 1 month ago

    That is a terrible indicator of the state of the housing markets across Canada. People taking cash advances to pay their mortgages and rents is not the sign of a healthy economy.
    Get out while you can. If you are on the hook because you wanted a rental property why didn’t you buy a USA house for 50k? See Zillow, Redfin and Landsearch.

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