Canadians are a little more cautious about borrowing these days. Bank of Canada (BoC) numbers show household debt reached a new all-time high in May. Even though the balance is at a record high, the rate of growth is rapidly cooling. Canadian household debt grew at the slowest rate for May since 1983.
Canadian Household Debt Reached Over $2.19 Trillion
Canadian household debt held by institutional lenders reached yet another record high. The balance outstanding hit $2.19 trillion in May, up $73.1 billion from last year. That puts the rate of growth at 3.4%, when compared to last year. The debt is at a record high, but growth is still much lower than typically seen in Canada.
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 growth rate has fallen to one of the lowest in years. The 3.4% annual rate of growth in May is 22.74% lower than the same month last year. The last May to print such a low rate of growth was in 1983. So it’s been a minute.
Canadians Owe $1.57 Trillion In Mortgage Debt
Canadian real estate debt is still the majority of outstanding household credit. Institutional lenders held $1.57 trillion in mortgage debt in May, up $52.6 billion from last year. The increase works out to a 3.5% annual rate of growth. Once again, it’s a new record, but a very low rate of growth.
Canadian Household Debt Outstanding In Dollars
Total debt held by Canadian households, in Canadian dollars.
Source: Bank of Canada, Better Dwelling.
The rate of growth picked up from the month before, but is still down significantly from last year. The 3.5% rate of growth is 22.22% lower than it was during the same month last year. May was the slowest for mortgage growth since 2001, and the second slowest rate of growth for May since 1983.
Canadians Owe $628 Billion In Consumer Credit
Consumer debt finally surpassed the previous high reached last year. Outstanding consumer credit hit $628 billion in May, up $20.5 billion from last year. The annual rate works out to 3.4%, compared to the same month last year. Canadians almost looked like they were turning away from this segment. Then they rushed in to push a new all-time high.
Canadian Household Debt Change
Annual percent change in debt held by Canadian households.
Source: Bank of Canada, Better Dwelling.
The rate of growth continues to slide, and fell to a multi-year low for the month. The annual rate of growth fell to 3.4% in May, down 17.04% compared to the same month last year. It’s been a mostly steady slide from the most recent peak of 5.6%, which was reached this past November. Currently this May is the slowest since 2015.
Canadians are exercising a little more caution with their debt. Consumer debt is grinding to a halt, printing much more conservative levels than we’ve seen recently. Mortgage growth is starting to pick up on lower rates, but is still unusually low for the month. Overall, this is one of the slowest Mays for household debt growth since a rough economic period for Canada.
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This is an interesting data set to think about. 1983 – unemployment is 12% and overnight rates is 5x today. Today’s debt pile is so astronomically large, it has a similar impact.
Don’t forget mortgages were double the overnight back then as well.
Interesting to see consumer credit tapering too. Not a lot of shopping sprees happening with cheap credit and a booming economy? Seems strange.
I’m not sure what to make of it. You buy furniture – financed. You buy a computer – financed. You buy insurance – financed. You buy appliances – financed.
All these things that really do not cost a lot, people finance through the retailer. Retail has literally become part of the financial sector in order to get people to buy.
So are people more woke and not financing purchases anymore, or are people just not buying?
Here’s part of the reason debt is growing more slowly.
https://business.financialpost.com/transportation/autos/canadian-auto-sales-fall-for-16th-straight-month-and-even-the-reliable-luxury-segment-is-cooling-off
Auto sales are down for the 16th month in a row.
Personal financial confidence is a tricky equation and it varies widely amongst the population. Fortunately the levers are always the same, and the average consumer buys when they have financial confidence e.g. secure employment, increasing house values, low interest rates, stock market highs and positive headline sentiment. The consumer stops buying when they lose financial confidence e.g. insecure employment, rising interest rates, stagnating or declining house values, stock market declines, negative headline sentiment. I agree with Mortgage Guy, however, the tapering in spending is not that strange when you consider the consumer has been on a TEN YEAR spending spree and everyone runs out of credit some time or reaches their personal credit (dis)comfort level. Given the extreme highs in household debt relative to, well, everyone in the rest of the world, I am surprised growth in credit even exists in 2019, although it indicates that confidence still remains high. For how long, remains the question.
lots of shops and convenience stores are closing down in Scarborough and a few pockets of North York; businesses which were in existence for almost a decade, even more.
A manager that I know who works for a low cost grocery store would complain that there is a rise of petty theft and customers sampling produce at an alarming rate, that they had to resort to posting a sign warning that sampling foods before paying incurs a $10-$100 administrative fee. Still doesn’t deter anyone from “sampling” the berries or nuts.
And before Doug Ford’s supporters begin with their discrimination, my manager stated that the types of people doing these petty theft are people who are in their middle age, not young immigrants.
I guess the retirees and middle age people don’t have any rising equity, who knows?
Not surprising. I see this change at a popular Asian Supermarket in Markham that I have been shopping for the last 6 years or so. Since last summer the checkout counters have not been that busy and once could easily checkout in minutes. I thought that this was seasonal and that the customers would return in fall which never happened.