Canadian households hit a new all-time high for debt, but the level of growth is slowing. Bank of Canada (BoC) numbers show the balance of household debt reached a new high in March. Despite breaking a new record, Canada’s credit growth is at recession low levels of growth. This can present a major kink in the chain of a debt driven economy.
Canadians Owe Over $2.172 Trillion In Household Debt
The balance of household debt owed to institutional lenders is seeing growth slow. The outstanding debt total reached $2.172 trillion in March, up 0.18% from the month before. The growth works out to 3.26% higher than the same month last year. The balance of debt is an impressive pile, but there’s some concerns about growth.
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.
The annual pace of growth is one of the slowest on record, and hasn’t been this low outside of a recession. The 3.26% growth in March was higher than the month before, but it was only 0.02 points higher. The minor acceleration is encouraging, but not enough to change the reality. This was the slowest March for household credit growth since 1983.
Canadian Households Owe $1.55 Trillion On Mortgages
Residential mortgage debt represented the largest segment of outstanding credit. Mortgage debt reached $1.55 trillion in March, up 0.15% from the month before. The increase works out to 3.22% higher, when compared to the same month last year. Once again, the balance is a new record high, but growth is still near a multi-year low.
Canadian Household Debt Outstanding In Dollars
Total debt held by Canadian households, in Canadian dollars.
Source: Bank of Canada, Better Dwelling.
Canada’s mortgage credit grew at a pace rarely seen outside of recession. The 3.22% annual increase in March was also just 0.02 points higher than the month before. Even with the increase, this is also the slowest March for annual growth since 1983. Not entirely surprising, since mortgage debt is the largest component of household debt.
Canadians Owe $619 Billion In Consumer Debt
The remaining outstanding balance is consumer debt, which is still below peak. Outstanding consumer debt hit $619.8 billion in March, up 0.26% from the month before. The increase works out to 3.37% higher than the same month last year. Consumer debt isn’t booming, but it’s at a level we’re a little more familiar with. The last March to print such a small number was just 3 years ago.
Canadian Household Debt Change
Annual percent change in debt held by Canadian households.
Source: Bank of Canada, Better Dwelling.
Canadian household credit growth slowing recession era levels is a mixed blessing. Highly indebted households are typically subject to more severe consequences during a recession. Recession levels of growth without a recession allows households to better position themselves. This can lessen the impact of economic shock, which is the healthy thing to do. On the other hand, slowing credit is a problem for a debt driven economy, that doesn’t quite remember what it did pre-housing boom.
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Just remember, extend credit when we should be, and we weaken the dollar. It’s not a good thing, it’s just a vanity measure.
Your gentle reminder that B-20 isn’t responsible for nearly as much of a decline in growth as you would think.
First year with B-20, March 2018 sees 22.58% decline in credit growth. Possible, but not confirmation that B-20 is responsible for all of it.
Second March under B-20, March 2019 gets another 31.25% drop in growth? Are people saying they added a B-21 and B-21.5 to drop that?
Is the data adjusted for inflation?
Same news over and over again
Ugh, it’s like monthly numbers come out every month.
I can enlighten the youngsturds who were not old enough in the early ’90s.
I bought my first house (Townhome) in the GTA in Dec ’92 for 150k and when we sold in ’99, it went for a whopping 155k. Far below cost of living over 7 years. That was normal during that period. Prices really didn’t start rising until 2002. It was a 9 year ride to nowhere.
To think this is not possible again, is really naive. Immigration levels currently aren’t much different, if you check the historical charts.
This time is different!
– Real Estate Agent
Good comment. And this is why RE isn’t an investment unless, ya know, you are an investor and bought as an investment based on cash flow and NOT asset appreciation. We all got caught sniffing butts and not considering their is a dog at the other end that can whip around and bite us…think about it…thiiinkkk about it. lol…tock. BD4L.
*there…way to be an idiot blue. what does this even mean? – Blue from the future
I find it quite interesting that seemingly benign articles on BD garner such a lackluster responses from the jockeys,pumpers and deniers…however this is far from a wet fart. When rates were in the double digits, ie. the 80s, mortgage debt was growing and it looks like the average was around 10%. We’re in a low rate environment AND outside of a recession AND in a boom time economically (or so I’ve heard). Liquidity is the issue. Like small caps with stupid low floats, it doesn’t matter what the price is if there isn’t the liquidity to allow for the transaction when there is influx of volume/demand/selling. That’s what the 88s keep forgetting; it isn’t about comps, DOM, Sales to listing, etc…the issue is all about debt and liquidity.
The wagons have circled at the major lenders; the only way the BoC could keep it going, and it is still grinding to a halt, was to pump liquidity into the market via bond purchases! And this is the boom times. Tock. BD4L.
Hey Blue, why do the bond purchases affect the market.
Or rather, who is giving the money to who to create the liquidity?
Are tax payers paying the big 5 for their mortgages?
Bond purchases drive down interest rates in the bond market. For example, if the BoC buys mortgage bonds, banks can float mortgage bonds at a lower yield than otherwise. They can then turn around and lend at a lower interest rate while preserving their spread.
The BoC must be very worried about the housing market to have started to purchase mortgage bonds this year, of all times, when the jobs market is allegedly booming and the economy allegedly in just a bit of a weak patch. I figure the BoC is trying to inoculate the housing market against it’s own feeble rate hikes. Which is weird, considering the most over-heated sector of the economy was, until recently, housing. Shouldn’t the most overheated sector bear the full weight of the rate increases? I guess the BoC thinks housing is too big to fail.
To answer your other question, no, taxpayers are not helping to pay for mortgages via bond purchases. But they will be helping to cover mortgage defaults via the CMHC if the housing market serves up a major stinker.
So who pays for the BoC mortgage bond buying ?
1) Present and future home buyers, because the BoC is deliberately supporting higher housing prices
2) Savers, who suffer from any action designed to lower interest rates.
It is more like they are buying from one crown, CHMC so they can lower something (premium required on insured mortgage?) so more debt can be issued at a lower rate. All I got from this is: government printing money.
I believe you work in finance. You drop some good comments that seem to have more insight than your regular hamster, so to speak, and this hamster fell off the wheel trying to understand something like this…I just started learning about debt 2 years ago and it is still a head scratcher. Help a fur brother out…if you have any additional points, hop on the wheel and take a spin! Tock. BD4L.
I used to comment as Alistair McLaughlin, but can’t anymore under that moniker for some reason. Maybe I was attracting too many trolls? A certain GTA landlord was constantly flaming me and maybe BD just thought I was more trouble than I was worth. 🙂
As Grizz would say ‘Watch the bottom, 1 bedroom’. Tock. BD4L.
Come on, people! Don’t stop spending now. Your wife NEEDS that open concept kitchen!
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