Canadian HELOC Debt Is Rising At The Fastest Rate Since 2013, All With Variable Rates

Canadians are tapping that windfall of home equity and are ready to pay a lot of interest to do so. Filings with the bank regulator show home equity line of credit (HELOC) debt increased in March. It’s now growing at the fastest rate since 2013, after contracting over the past few years. The debt is entirely variable rate and less than two-thirds of total home equity loans. 

Canadian HELOC Debt Reached $167 Billion

Canadian HELOC debt has been climbing in an odd pattern for the past few months. The outstanding balance reached $167.3 billion in March, up 0.3% ($510 million) from a month before. The balance is 1.4% ($2.3 billion) higher than last year, which might not sound like much. However, it’s one of the fastest rates in a long time and created an unusual pattern that stands out on the chart. 

Canadian HELOC Debt

The outstanding balance of Canadian home equity line of credit held by institutions.

Source: OSFI; Better Dwelling.

Canadian HELOC Debt Is Growing At The Fastest Rate Since 2013

HELOC debt made one of the biggest annual jumps in nearly a decade. April’s 1.4% annual growth is the largest annual rate seen since May 2013. It’s also only the second positive number since 2018. It may seem small compared to other real estate growth metrics but it’s still huge growth. It’s also a reversal of a previous trend where households were de-leveraging. More important is the fact that all of this debt is variable rate.

Canadian HELOC Growth

The annual growth rate for Canadian HELOC debt.

Source: OSFI; Better Dwelling.

Canadian HELOC Debt Is Just A Fraction Of Home Equity Loans

There are many home equity secured products similar to HELOCs not included in this data. You might think you have a HELOC with a fixed rate schedule, but it’s not counted as one. The loans might be secured in the same way, but the repayment schedule is the difference.

Combining the balance of all home equity loans, the balance is much higher. The home equity balance reached $291 billion in March, increasing 0.8% ($2.4 billion) in the month. The outstanding balance is 7.3% ($19.8 billion) higher than last year. Double the monthly growth of just HELOCs. Some people are in a mad dash to lock in rates before interest rates rise further.

HELOC debt is growing at the fastest rate in almost a decade but it’s still relatively low. Lower than inflation, for sure. That’s the good news. 

The bad news is growth for a product with variable interest costs is surging higher. At the same time, other types of home equity loans are rising at a much faster rate. The total balance is now almost $300 billion, which if combined with mortgage debt, means housing is securing debt larger than Canada’s GDP. That’s not even including private lenders. 

3 Comments

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  • Mark Bayly 8 months ago

    Canadian politicians will just keep borrowing and printing money and Canadians will just keep borrowing money until the whole system collapses

    • Armchair economist. 8 months ago

      Unfortunately you are correct. The money printing will never stop and just be throttled till the whole system comes crashing down and is replaced with something else. In fact while rates are rising central banks are still printing money thereby further fueling inflation. Keep in mind it’s the money supply that has the greatest effect on inflation and devalues currency. I suspect that we’ll see 1 more 50bps increase and then a pause on rate increases or the whole thing comes tumbling down in a fast and uncontrollable manner. Let’s hope that a softish landing can be engineered.

  • Trader Jim 8 months ago

    I wonder how this worked out. Boomers lent their kids cash for a down payment at variable rates and they went and took out variable rates and face more interest costs. Then you toss the cost of interest repricing housing and I think they may have just lost the farm. Of course the benchmark is designed to reduce and decline peaks by averaging it out but somehow seems to amplify increases.

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