Canada

Canadian HELOC Balances Made The Biggest December Drop Since 1992

Canadians made an unexpected move to deleverage a little of their HELOC debt. Bank of Canada (BoC) data shows HELOC debt fell in December. The decline was unusually strong for the month, at a rate not seen in decades. The drop wasn’t enough to bring the trend negative, however growth is negative in real terms.

Home Equity Line of Credit (HELOC) 

Home equity lines of credit (HELOC) are loans secured by a homeowner’s equity. By securing a loan with the equity, they can use their home like an ATM – borrowing the value, and repaying it. Since the bank has something to collect if it’s not paid, they can charge a lower interest rate. Homeowners can then use their home’s value for another home or vacation – like the bank ads suggest.

Canadian Have $260 Billion In HELOC Debt

Canadian HELOC debt fell in the latest number, making the biggest drop for the month in years. The outstanding balance reached $259.73 billion in December, down 0.14% ($369 million) from the month before. This represents a 1.58% ($4.04 billion) increase from the same month last year. Both of these numbers are unusually low for a December, even in a recession.

Canadian HELOC Debt

The dollar amount oustanding in home equity lines of credit (HELOC) held by institutional lenders in Canada.
Source: BOC, Better Dwelling.

Biggest December Drop For HELOC Debt Since 1992

Growth for HELOC debt has been low since the government showered people with money. The 1.58% rate of annual growth in December is lower than just a month before. Both the monthly and annual drops are the lowest for December since 1992 and 2015, respectively. In any case, the growth is low enough to be considered negative in real terms. 

Canadian HELOC Debt Change

The 12-month percent change in the oustanding balance of home equity lines of credit (HELOC) held by institutional lenders in Canada.
Source: BOC, Better Dwelling.

Canadian HELOC debt made an unusually large monthly drop, showing some deleveraging. That sounds like a great thing, since reducing liabilities during a recession can be a smart idea. Due to the role HELOC debt has played in consumption however, it means a slower recovery.

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