The pandemic didn’t slow Canadians from borrowing more to buy real estate. In fact, mortgage data may be showing the exact opposite. Statistics Canada (StatCan) data shows residential mortgage credit hit a record in 2020. Typically during a recession credit growth is expected to slow down. Last year saw the opposite, with declining rates pushing growth to a multi-year high.
Canadian Households Owe $1.65 Trillion In Mortgage Debt
Canadian mortgage debt hit a new record high, at breakneck speed. Households had an outstanding balance of $1.65 trillion in Q4 2020, up 2.1% ($34.4 billion) from the previous quarter. Compared to a year before, this number is 7.1% ($110.0 billion) higher. These numbers only include the total of residential mortgage credit held by households. Business owned residential real estate is excluded.
Canadian Residential Mortgage DebtThe outstanding dollar amount of residential mortgage credit households owe. Source: Stat Can, Better Dwelling.
The rapid rate of mortgage credit growth isn’t just fast for this period, but it’s monumental for any. The quarterly increase of 2.1% is the biggest since Q3 2015. The dollar increase of $34.4 billion is unprecedented for a single quarter. To say households are comfortable borrowing during the recession is an understatement.
Canadian Residential Mortgage Debt ChangeThe 12-month percent change in the outstanding dollar amount of residential mortgage credit owed by Canadian households. Source: Stat Can, Better Dwelling.
Even factoring in the pandemic’s worst quarter, the annual rate of growth is a multi-year high. Mortgage credit’s 7.1% growth is the highest rate since 2011. Worth a mention is mortgages were growing at a multi-decade low before the pandemic. The recession’s low rate environment provided stimulus, which may seem unexpected. It’s likely a welcome and desired effect for policy makers.
The record mortgage growth is very large, but there is a base effect occurring. Mortgage credit had unusually low growth in 2019, so it was likely to accelerate in 2020 anyway. The boost from lowered interest rates helped give it a big boost though – like pouring gas on a fire breaking out.
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