Canada

Canadian Household HELOC Debt Is Barely Growing

Canadians are becoming a little more cautious about using their homes like ATMs. Office of the Superintendent of Financial Institutions (OSFI) filings show loans secured by residential real estate slowed dramatically in December. This segment of debt has been slowing in growth over the past year. Recently, the balance has begun negative real growth.

Canadians Have Over $304 Billion In Debt Secured By Home Equity

Loans secured by residential real estate, such as home equity lines of credit (HELOCs), are slowing in growth. The balance for all loans in this segment hit $304.04 billion in December, down 0.17% from a month before. This is just 2.18% higher than the same month last year. This is the first-time the monthly change hasn’t set a new record in almost two years.

Total Loans Secured With Residential Real Estate

The total of personal and business loans, secured with residential real estate.

Source: Regulatory Filings, Better Dwelling.

The rate of growth is now at one of the lowest points in recent history. The 2.18% 12-month increase seen in December, is the lowest since June 2018. During that June, the rate of growth only lasted for a single month as well. We need to go all the way back to 2016 to find a period where the 12-month growth was this low, for more than a single month. Growth is now negative in real terms.

Personal Loans Secured With Home Equity Slows To Lowest Rate In Half A Decade

Breaking that number down, the weakness appears to be in personal loans. Personal loans secured by residential real estate reached $268.76 billion in December, down 0.53% from a month before. This represents an increase of 0.56%, when compared to the same month last year. This is the weakest 12-month growth since 2014, and the segment is negative in real terms.

Personal Loans Secured With Residential Real Estate

The total of personal loans, secured with residential real estate.

Source: Regulatory Filings, Better Dwelling.

Businesses Have Borrowed Over $35 Billion, Secured By Home Equity

Loans in this segment to businesses represented the rest, and they were doing better. The balance of business loans secured by residential real estate hit $35.28 billion in December, up 16.57% from a month before. This represents an increase of 2.67% compared to a year before. Not quite a new all-time record high, but substantial growth.

Business Loans Secured With Residential Real Estate

The total of business loans, secured with residential real estate.

Source: Regulatory Filings, Better Dwelling.

Canadians are drawing less cash from their home, despite cheaper rates. Home equity has previously been a strong driver of consumer spending as well. If this doesn’t change direction soon, expect more broad consequences.

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7 Comments

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  • TLK 3 months ago

    and probably rate cut tomorrow, so bank margins are going to get tighter.

    How does that even work when insolvencies are rising?

  • Tom Wolfe 3 months ago

    ‘Canadians are becoming a little more cautious about using their homes like ATMs.’

    That’s hilarious. It’s the banks that have stopped lending, not the other way around. Home equity is far less. Banks have much higher risk. They have taken their credit-ball and have gone home. They are waiting out the borrower. ‘Rope a dope’ as Ali said. Next knock on the door will be repo-man when the houses are upside down. ‘I’ll have your house now’.

    • BailinginBC 3 months ago

      Yep – I see a lot of clients who have maxed their HELOC – they would absolutely borrow more if they could to keep things going – but someone took away the punch bowl.

    • Brad 3 months ago

      That’s not the way it works in the least as the banks do anything in their power to avoid a customer defaulting. Why ? Because that in turn leads to consumer proposals and other debt recovery mechanisms.. a lot of the time banks will bridge loan an LOC at a lower APR in order to help get the person out of debt. It is actually *extremely* rare that a mortgage is called in and repo’d in Canada even during hard recessions.

      • Gudu Jones 3 months ago

        As long as the losses don’t exceed a pre-determined threshold for the bank…it’s a write off.
        Canadians will forgo paying other debt instruments but not their mortgage.

  • Adam Zandberg 3 months ago

    Mortgage growth is way up in January,
    Probably alot of refinance; blend/extend and pay off heloc.

  • DB 3 months ago

    I would say all of the above..look at the chart beginning in 2012 to now. 2012 was not that long ago..you can’t say salaries have kept pace with the cost of housing and all that loaded debt..the top banks have not strayed from their formula. most of the old dept they want to keep because of the values of their clients who do not need more cash(or as much) and they can alway’s say no if its too risky..the new debt seems to be going to second and third rate lenders who just want a part of the game. But eventually even they will get out of the buis because if your doing well and have good clients who can pay their bills the banks will target them for take over and example of that would be Laurention bank. I was a client of theirs when they were taken over. but all that debt looks to heavy for a house of cards ready to collapse. This is the time of “return to norma” and now we are into the blow off phase.. 🙁

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