Canada

Canadian Household Credit Growth Barely Moves, Annual Growth Falls To 1983 Levels

Fresh off an epic credit binge, households in Canada are starting to shy away from more debt. Bank of Canada (BOC) numbers show household debt levels barely moved in February. Not only did debt barely move from the month before, but the annual pace of growth fell to levels not seen since 1983.

Canadian Households Owe Over $2.16 Trillion In Debt

Canadian households set a new debt record, but have slowed down dramatically. The balance of household debt at institutional lenders hit $2.16 trillion in February. The balance grew 0.01% from the month before – just $244 million. The annual pace of growth fell to  3.2%, the slowest it’s been since 1983. The credit slowdown is real, and happening in both major segments.

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 Hits $1.5 Trillion

Canadian mortgage debt hit a new record, but growth is at a multi-year low. Mortgage debt represented $1.55 trillion of the total in February, up 0.06% from the month before – about $1 billion. The annual pace of growth fell to 3.2%, the slowest annual mortgage growth since June 2001. It was also the slowest February since 1983.

Canadian Household Debt Outstanding In Dollars

Total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

Consumer Debt Makes Slight Decline To $618 Billion

The rest of the debt was represented by consumer credit, which fell from record highs. Consumer debt represented $618 billion of the total, down 0.12% from the month before. The annual pace of growth hit 3.4% from last year, a level seen last August. The balance fell a little, but the annual pace of growth is healthy-ish looking. You know, as long as you’re not the consumer borrowing the actual debt.

Canadian Household Debt Change

Annual percent change in debt held by Canadian households.

Source: Bank of Canada, Better Dwelling.

Household credit growth is slowing much faster than most people anticipated. The pace of growth is below the typical rate of interest, meaning replenishment is slow. Sounds great for consumers, who need a break from the debt fueled shopping spree they’ve been on. However, a significant portion of economic growth has been tied to credit expansion. The slowing of growth to near recession levels is going to be felt more broadly than just home sales.

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13 Comments

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  • KT 8 months ago

    This is bad. If you’re old enough. think about how much easier it is to get credit today, than it was back in 1983 to understand how much this is a problem. I remember just 20 years ago having to do things like send in pay stubs for proof of income for credit. Now you can get a credit card at the grocery store on the way in.

  • Trevor 8 months ago

    That dollar chart is unreal, and you can see how oil patch weakness in 2001 led to everyone printing credit to hide poor household health.

  • Igor Vuksta 8 months ago

    Steve Eisman (big short guy): “a simple normalisation of credit” will have a big impact on Canada’s banking sector

    https://moneyweek.com/504059/steve-eisman-2/

    Anyone that thinks a “shortage” of supply or immigration is going to prevent the next recession is a damn fool.

  • Robert 8 months ago

    Think about people who bought before 2009. Their original (first)mortgage had much higher interest rate than today. Now rates are much lower so they are paying off their debt much faster (much more goes to principal).
    Some of the reduction of debt is actually attributed to people paying off their mortgages and not just due to redaction of sales

    • MH 8 months ago

      Do some people really hate reading that much? Try it, it’s fun (there are pictures too):

      https://betterdwelling.com/canadian-mortgage-holders-are-paying-over-27-more-interest-than-principal/

      • Robert 8 months ago

        And do you bother to analyze the data in that article or you just read the headline and pee in your pants?

        So according to that article today people paying 27% more interest than principal. Now in the same article look at historical graph – let’s say Q4 2003. In Q4 2003 people were paying 300%+ more interest than principal. Does it mean it was shitty situation in 2003? Absolutely not. Make your own conclusions.

        • MH 8 months ago

          Of course I don’t. I would not dare to soar to the level of analysis of the new breed of RE visionaries who can look at the record debt levels, add increasing percentage of money going towards the interest payments and conclude that it is happening because people are paying off their mortgages faster.

          Don’t pay attention, I am just jealous.

    • Phil 8 months ago

      “debt is actually attributed to people paying off their mortgages and not just due to redaction of sales”

      You know what replenishment means, right? It’s issuing new loans to cover the old loans. If they stop doing that, revenues drop, stock prices drop, and they have to find “efficiencies” to preserve margins. This is what precedes the unemployment rise.

  • Bob Emery 8 months ago

    Come on, guys! It’s our patriot duty to spend, spend, spend to prop up the economy. We all still have some room on our credit cards, right?

    • SUMSKILLZ 8 months ago

      Now’s a good time to build a survival bunker…they don’t come cheap. Then you have to fill it with rations. Probably cheaper just to buy a condo…if enough people buy a condo, the problem will go away. Didn’t that work in China as a strategy? 65 million empty condos…

      • vnm 8 months ago

        They aren’t that big, why don’t they just ship them to Canada in containers, and sell them at Walmart?

  • Investor 8 months ago

    Some people think that truth tellers are just being unnecessarily critical. When this thing hits the fan, no one is going to be spared. The clarion call has been going on for years now, some still went ahead to help the banks push real estate prices to ridiculous height. Now diminishing return has set in and we’re all going to suffer the rough ride.

  • Resident 8 months ago

    It appears as if panic unloading has already commenced in some areas of the York region.

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