Canadians aren’t acting like themselves and it may be a sign of a more concerning trend brewing. Bank of Canada (BoC) data shows annual household credit growth decelerated in May. Just off multi-decade lows, despite cheaper credit on the way, households are pulling back on borrowing. The low growth for borrowing is even more concerning when the rapid population growth is also considered.
Canadian Household Borrowing Is Unusually Slow
Canadian households have suddenly stopped borrowing, and to say it’s unusual downplays how concerning it is. Household credit advanced just 3.4% (+$96.2 billion) to $2.95 trillion in May. Annual growth is returning to deceleration, potentially having hit its peak growth for the year. The rate of change is now just 0.2 points above the rate reported in October, which was the lowest rate in well over 30 years.
Canadian Households Are Pulling Back On New Debt
The annual rate of growth for household debt.
Source: Bank of Canada; Better Dwelling.
Canadian household credit’s unusual dependence on mortgage credit is one of the big issues here. Outstanding mortgage credit at institutional lenders climbed 3.5% (+$74.5 billion) to represent $2.18 trillion of the household debt in May. Annual growth is only 0.1 points above the rate reported in January 2024, which was the slowest advance since 2001—over two decades ago.
Canadian Mortgage Credit Not Getting A Boost From Population
Annual rate of growth for outstanding mortgage credit.
Source: Bank of Canada; Better Dwelling.
As mentioned above, the dependence is unusually high. Outstanding mortgage credit represents 73.9% of all household debt, 4.7 points since the 2020s began. Over the past decade, the share has increased 8.2 points as home prices began to escalate, adding on about half following the months of record low rates. Since rates began climbing, the share has slowed—but it’s a long way back to healthier levels.
Low rates used to create inflation by pulling demand forward, meaning a slowdown was expected. However, it shouldn’t be this slow considering the elevated level of inflation and a rapidly expanding population. When viewed in conjunction with the rising unemployment rate, this might be more concerning than an issue that can be dismissed with the excuse that people are simply waiting for lower rates. Ironically, the slowdown of credit is likely to amplify unemployment since much of it was based on the temporary surge of cheap credit.
Honestly surprised since there’s been so many decelerations of a strong market (even though they were false). Good for them. If the BoC was going to rebuilt a world class economy, it would embrace a little deflation to reintroduce efficient capital.
Of course it isn’t, and this is Tiff-I-Don’t-Have-Any-Real-Opinions-Macklem.
A guy can dream though, can’t he?
What do you expect by fleecing the gullible overseas in studying at Canadian diploma mills? Nobody in their right mind wants to exist just to pay someone else’s mortgage so that the slumlord can become richer.
I don’t think they said that. It emphasizes that credit is falling faster on a per capita basis.
Why should an increase in population driven by miss migration be correlated with credit ?
Very few of the newcomers and almost all of the ones I’ve seen wouldn’t qualify for credit anyway.
But don’t worry… it’s all under the table anyway, any credit needs will be met from “shadow banking” aka loan sharks from their own communities.. and not from the formal Canadian banking system..
ah sorry I just made a typo, i mean MASS-migration not MISS-migration, though come to think of it MISS-migration ts a better moniker for what we have here now…
There’s no need for credit when all are deterred by the state if the economy. We know Tiff and Co. Once again have misread the market,or read it right and tried pulling the wool over Canadians’ eyes.
New Canadians from the #1 supplier country do not spend money. Ask the businesses in Banff, or Blue Mountain. Packed, but spend nothing when they are there.
If it is free then Brampton residents will be there enmasse.
The reason interest decreases aren’t working as planned, may because the rapid “infation” was never based on actual demand or supply problems, but rather on price gouging at every level. After the recovery of supply chains from covid days, prices should have soon stabilized, as the extra money in the system was moped up by overpriced good and services on the bookend of covid mesures closing up.
Was it then an error to raise the interest rate at this accelerated rate to correct an inflation that was created by covid and maintained by greediness, making everyone house poor in the process?
Then the secondary effect was on homes…
People need a place to live, housing is desperately needed work millions coming in and the methods used decreased the builders ability to built homes.
The government lied to Canadians, secured many that interest rates were low and stable for a loooong time, created the biggest housing buying crisis/bubble in history… only to turn around and make it hardly possible to pay mortgages.
NOBODY IS BUYING IN CANADA.
NEW USA HOUSES COST 300K OR LESS IN THE USA. OLDER ONES LESS THAN 50K
Canadians whatever a Canadian is are going to lose their reputation as the biggest debt junkies on the planet Just the people not the governments.
It looks like Canadians finally has got a memo)))
US mortgage demand just increased 16% on lower rates. Should same happen here?
It didn’t increase. Refinancing applications increased 16%, which isn’t the same as new credit demand—it’s actually the opposite. LOL.