Canadian households didn’t need incentive to borrow, as credit growth was already accelerating. Bank of Canada (BoC) data shows the outstanding balance of household debt reached a new high in February. The rise of debt was due entirely to inflating mortgage balances. Consumer credit, the other major segment, continued to nosedive – printing a second monthly drop.
Canadian Households Owe Over $2.2 Trillion In Debt
Canada’s household debt advanced at the fastest pace in over a year. The balance of household credit outstanding reached $2.27 trillion in February, up just 0.12% from a month before. The increase works out to a rise of 4.3%, when compared to the same month last year. This is the highest annual rate of growth since May 2018, nearly two years ago. Despite the lofty growth as an aggregate, only mortgage debt grew in the past couple of months. Consumer debt made a substantial move in the other direction.
Canadian Household Debt Outstanding, Percent Change
The annual percent change of total debt held by Canadian households, in Canadian dollars.
Source: Bank of Canada, Better Dwelling.
Canadian Mortgage Debt Reached $1.63 Trillion
Residential mortgage credit reached a new high, and posted big annual gains. Mortgage credit represented $1.63 trillion of the balance in February, up 0.25% from a month before. This works out to 5.0% higher than the same month last year. This is the highest growth since March 2018, just a month under two years.
Canadian Household Debt Outstanding In Dollars
Total debt held by Canadian households, in Canadian dollars.
Source: Bank of Canada, Better Dwelling.
Consumer Credit Drops From Highs
Consumer credit fell for a second month, putting a drag on household credit growth. The balance of consumer credit reached $637 billion in February, down 0.22% from the month before. This brings growth down to just 2.5% when compared to the same month last year. Other than the past few months, this level of consumer credit growth isn’t seen often. It was last seen during the collapse of oil prices in 2014 and 2015.
Canadian Household Debt Change
Annual percent change in debt held by Canadian households.
Source: Bank of Canada, Better Dwelling.
Canadian household debt is accelerating after taking a break for a few months. One important point here is, consumer debt is falling, which is often seen as a confidence indicator. If you’re doing well, you might as well finance that expensive thingamabob, right? That doesn’t seem to be the case, as consumer credit is showing poor growth, and has fallen for the past few months.
As the pandemic continues, it’ll become harder and harder to push this number higher. Home sales are expected to cool, as more boards recommend a stop to all face-to-face business. Refinancing and equity extraction may take over though, depending on how much emergency cash households will need.
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Starting with March and April numbers, we’ll still see this number grow for mortgages, but it will be entirely from re-financing and balance swelling from deferrals.
What’s the ski jump going to look like on these graphs going down the other side??