Canadian Household Debt Accelerates As Mortgage Borrowing Returns

Canada’s economy is slowing down but that’s not deterring households from borrowing. Statistics Canada (Stat Can) data shows growth of household debt accelerated in November. The move was led by higher demand for mortgage credit which has accelerated over the past year, but still remains below historic levels. 

Canadian Household Debt Tops $3.02 Trillion 

Canadian household debt continues to print records while showing signs of acceleration. The outstanding balance climbed  0.4% (+$13.0 billion) to $3.03 trillion in November. Annualized growth came in 3.9% (+$113.3 billion) higher than last year, hitting the highest level since May 2023. Household borrowing is picking up, but it remains significantly below the 5-year average for annual growth (+5.0%).  

Canadian Mortgage Debt Is Growing As It Redirects Funds From Other Segments

Annual growth of the balance of mortgage and non-mortgage debt owed by Canadian households.

Source: Statistics Canada; Better Dwelling. 

Canadian Mortgage Debt Growth Is Accelerating 

Most household debt are mortgage loans, and that was the driving force behind the mild acceleration. Residential mortgage debt climbed 0.5% (+$10.6 billion) to $2.25 trillion in November. Monthly growth was notably higher than the 0.3% seen last year, and has been hovering in the 0.4% to 0.5% range since May 2024—the month that preceded the central bank’s first rate cut. 

Over the past year, households have generally racked up mortgage debt at a faster rate. Annual growth came in at 4.0% (+$85.9 billion) in November, marking the third month of acceleration. It’s now at the highest level since June 2023, so an appetite for mortgage debt has returned. However, the rate is much lower than the 5-year average for this segment (6.6%). 

Growth of Non-Mortgages Loans Is Slowing  

Canadians are losing interest in all other loans. Non-mortgage credit advanced 0.3% (+$2.4 billion) to $779.07 billion in November, about half the monthly rate seen last year. Annualized growth slowed to 3.7% (+$27.5 billion), returning to August levels. It’s not exactly breakneck growth, but it indicates a potential issue. 

Real estate-heavy economies (like Canada) tend to see residential investment suck the growth out of other areas. This leads to a concentration of resources, resulting in a narrow economy that lacks diversification, making it more vulnerable to shocks. The recent real estate slowdown could have allowed for graceful diversification from this vulnerability. 

Unfortunately, despite warnings from organizations like the Bank of Canada (BoC), policymakers concentrated incentives to grow mortgage credit. Preserving growth at a high level is ideal for short-term optics, but it can amplify the problem of a housing-dependent economy. It may result in a brief period of growth, but ultimately creates a less stable market over the long-term.