Canadian Household Borrowing Rates Make Unusual Stall For 4 Weeks

Canadian household borrowing rates may have hit a wall. Bank of Canada (BoC) numbers show the effective household borrowing rate stalled in December, for 4 consecutive weeks. The rate, which is the typical interest rate paid by households, is still substantially higher than last year.

Effective Borrowing Rates

The effective borrowing rate is the typical rate household encounter when borrowing. Mortgage and consumer loan rates are blended with discounted and posted rates. This is in contrast to using just the posted rate, seen in most analysis. Since numbers are being drawn from the actual rates people are paying, it’s closer to real world numbers.

The Typical Borrowing Rate Is Nearly 17% Higher

Canadians are near record lows for loan interest, but the cost is still making a huge climb. The effective rate reached 3.98% on December 28, holding the level it hit four weeks before. The rate is up 0.25% from the month before, and up 16.71% compared to the same time last year. That’s a huge increase, which could be why we’re seeing a stall for such a long period.

Canadian Household Borrowing Rate

The Bank of Canada’s weekly effective borrowing rate for Canadian households. The number is a weighted average of interest rates on mortgage and consumer credit products.

Source: Bank of Canada, Better Dwelling.

The Growth Rate Has Been Accelerating

Think that means borrowing rates are peaking in growth? That’s not so clear, since the annual pace of growth has been accelerating. The 12 month growth rate is 51.03% higher the same period last year, and it’s one of the highest paces of growth in Canadian history. We are seeing an unusual stall on a weekly basis, but the annual pace is still very large.

Canadian Household Borrowing Rate Change

The 12 month percent change for the Bank of Canada’s weekly effective borrowing rate for Canadian households.

Source: Bank of Canada, Better Dwelling.

The high growth rate should be offset by the fact that we’re coming off of lows. People are still surprised by fairly logical market moves, however. That said, rates stalling for 4 weeks while credit growth plummets doesn’t feel like a reason to see higher rates.

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  • Ethan Wu 5 years ago

    This is why smart money was saying the housing bubble would hammer Canadian dollars. They can’t raise rates to keep up with the US, even if home prices will be temporarily saved.

    • Trader Jim 5 years ago

      I don’t think the rest of the world is going to do well over the next years, but I think Canada’s large household debt and propensity to preserve home prices, are going to make it much harder to purge the country’s economic inefficiencies. I expect Canada to do worse for longer than the United States.

      • Alistair McLaughlin 5 years ago

        Yep. I believe we are back to where we were in 1990 again. Both Canada and the US entered recession in 1990. The US recovered quickly, and by the mid-1990s was booming. The Canadian economy remained flat on its back – the so-called “jobless recovery” – until 1997. That meant seven years of misery, under-employment, and low to negative income growth for millions of Canadians. Including yours truly.

        Once again we are facing structural issues – consumer debt chief among them – that are going keep us down on the mat a lot longer than the US.

  • Yusef 5 years ago

    Probably 2/3 of people are bad with money. I’m not sure why the Bank of Canada and the CMHC made monetary decisions to help 2/3 of people, while ignoring the rest of the economy. Canada just bounces from supporting special interest groups to supporting special interest groups.

  • Martin Suharto 5 years ago

    Would this have anything to do with yesterday’s piece, with the BOC buying mortgage bonds?

    • Trader Jim 5 years ago

      Kind of. If the Bank of Canada didn’t buy 5% of the auction, they could have had to raise coupon rates to attract more money. The increase in coupon rates turns into an increase for borrowers, since the money they’re borrowing costs more for the bank to acquire.

      Yes, central banks need to buy assets. But when they’re buying random assets to help fulfill they’re inflation mandate, you’re going down the Japanese asset inflation bubble.

      • Patrick 5 years ago

        This is the problem with managing the numbers, vs real economic growth. If we had real economic growth (that wasn’t just the government trying to force growth), we would have tax receipts to manage the federal debt. If we had tax receipts to manage the debt, the BOC would have more than enough federal assets they could buy.

        The expansion would be inline with the expansion of goods and services. Good economies should give households more from the government, not less at a higher tax rate.

  • Obi 5 years ago

    A $2000 iPhone coming, brought to you by your neighbor that bought too much house.

    • Ardent 5 years ago

      Huh, kind of sounds like inflation. If only there was some central body tasked with managing inflation in a responsible manner.

      • GC 5 years ago

        Managing inflation? In the land of perpetual borrowing against one asset class?! Shame on you to think such a thing.

      • Jason Chau 5 years ago

        Measuring iPhone price gaps might actually be a better measure of inflation for Canadians. 2% my ass. 😂

  • Wendy 5 years ago

    This is actually good for homebuyers. Prices are experiencing low growth, and rates are staying very low. It’s the perfect time to get into the market, especially in Toronto.

    • Alistair McLaughlin 5 years ago

      You’re new here, right?

      • Bluetheimpala 5 years ago

        I almost spit my coffee out. Pure Lulz. Tick tock. BD4L.

        • SCE 5 years ago

          Don’t you agree? Didn’t you just buy a place?


          • Bluetheimpala 5 years ago

            You came out of your hole to watch the festivities I see. Alas you still do not get it. At this point I would worry less about Blue and more about those around you. Or go buy some tulips,I’m sure you can get a good ROI. Lol. Tick tock. BD4L.

  • Mtl_matt 5 years ago

    Just locked in all my rates this week for five years at 3.79%. They were only offering 3.5% on the variable rate, not a great deal when that’s one hike away.

    • Gregory 5 years ago

      Why so high – best rates are 3.29% for five year fixed. Or 2.59% for variable 5ur

      • Trevor 5 years ago

        Where are you seeing this? Dominion has the lowest variable at 3.1% right now in Ontario, and a 3.34% 1 year fixed.

        3.59% is the best 5 year fixed available to most. I imagine Quebec might be higher.

      • Harprit 5 years ago

        Yes but only if u pay below 20% down. Otherwise best rate start from 3.69%. being all thing great, Duca offered me 3.54% for 5yrs fixed. Ridiculous chemistry, but practically true these days. Pay big down and get killed by at least 40points high rate.

  • Harprit 5 years ago

    Yes but only if u pay below 20% down. Otherwise best rate start from 3.69%. being all thing great, Duca offered me 3.54% for 5yrs fixed. Ridiculous chemistry, but practically true these days. Pay big down and get killed by at least 40points high rate.

  • Pranav 5 years ago

    Looks like the doomsday army that lives in the mom’s basement is out again. Lmfao!

    Look at rental occupancy rate at historic lows, with rents on the uptrend and to remain at elevated prices. Rents have never come down for more than 20 years.

    There are bargains to be had in the Toronto detached market, if you look closely that is positive on your EMI and can take two more interest rate hikes and still remain so.

    People here haven’t seen Asian cities where interest expenses are nowhere close to being covered by rent. Both Toronto and Vancouver is largely owned by immigrants who bring in money from abroad where these prices look cheap.

    Market doesn’t care if locals can buy a detached house. If someone can and in numbers greater than equal to sellers, prices keep going up. I hope the articles here aren’t so bearishly biased without accounting for the whole picture.

    • Neo 5 years ago


      China implemented capital controls for a reason. Their economy has been contracting since the second half of the past year. All this money that has been buying Canadian properties has been drying up but I guess you never got the memo. Vancouver is really toast after arresting the Huawei CFO. Expect backlash from that.

    • Oakville Rob 5 years ago

      Rent in Oakville has dropped since 2016. Houses that were renting north of $5k/month are sitting empty (for a year now) and would take $3k if anyone offered.

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