Canada

Canadian New Mortgage Demand Falls To The Lowest Level Since February 2020

Canadians are doing something uncharacteristic — they’ve slowed borrowing mortgage debt. Bank of Canada (BoC) data shows a big slowdown in new funds advanced for residential mortgages for February. A small seasonal monthly climb was present, but even so it was an oddly slow month. The past couple months look more like the slowdown of early 2020 instead of the boom times recently seen. 

New Mortgage Borrowing Dropped To Pre-Rate Cut Levels

Canadian mortgage borrowers are suddenly no longer in the mood for more mortgage debt. In February, lenders advanced just $35.6 billion in new loans, down 13.7% from last year. It was a small seasonal climb from January, but both months have been strangely slow. Fewer dollars haven’t been advanced for new mortgage debt since February 2020. Rates had yet to rise too, so it’s either buyer fatigue or rate hike anticipation. The BoC hadn’t done anything yet.

Canadian Total New Mortgage Lending

The total value of monthly new lending for mortgage debt, including new mortgages and refinancing.

Source: Bank of Canada; Better Dwelling.

Demand For New Uninsured Mortgage Debt Fell 7.5%

Breaking it down by uninsured and insured segments, both show sudden declines. In February, lenders advanced $30.0 billion for new uninsured mortgage loans, down 7.5% from last year. The seasonal monthly uptick was present, but the amount was still unusually low. New uninsured mortgage demand hasn’t been this weak since June 2020.

Canadian Total New Mortgage Lending

The total value of monthly new lending for insured and uninsured mortgage debt, including new mortgages and refinancing.

Source: Bank of Canada; Better Dwelling.

Insured Mortgage Demand Fell Off A Cliff — Down 36%

Insured mortgage demand has fallen off a cliff, with an unusually weak advance of funds. The dollar amount for the month fell to just $5.7 billion in February, down 36.2% from last year. Once again, a seasonal increase was observed month-to-month. However, excluding January, it was the smallest amount of insured funds advanced since 2017. As for January, it was the lowest demand for new insured mortgage funds since at least 2013. Regulatory data stops there, but the low likely goes much further back.

It’s important to remember the latest data is after the January warning from the BoC but before rate hikes. It wasn’t until March that interest rates climbed and the “super hike” only hit in April. In short, the credit throttling was primarily due to consumers, not monetary policy. People borrowed less due to buyer fatigue after the boom or in anticipation of rate hikes. The impact of higher interest rates will pile on top of this.

3 Comments

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  • Ron Bruce 2 weeks ago

    Mortgage demand has fallen off a cliff. I hope this is a situation where those seeking mortgages have come under the lens of FINTRAC, CRA and other financial investigative parties who have been sleeping at their desk for the past several decades.
    However, I must admit that those hiding (aid and abet) money movement under cover of darkness has been practising their trade for a generation ( Realtors, Lawyers of all stripes, Immigration, Banks and religious charities).

  • C.Rose 2 weeks ago

    Lower mortgage debt usually leads to less buying which leads to lower prices and this ahead of the big interest rate increases that are still to come… what happens after that. Don’t yell fire in the theatre.

  • Sam 2 weeks ago

    I know a guy who knows a guy who knows a guy who invested gains from illegal activity into Canadian property over the last 15 years and made a killing. Apparently he’s read the tea leaves and cashed out most of it…..do the criminals know something the BOC doesn’t?

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