Canada

Canadian Households Are Piling Into Mortgage Debt, Even As Consumer Debt Slows

Canadian households are still into debt, just not if it’s for anything other than a house. Bank of Canada (BoC) data shows household debt reached a new high in September. Most of the debt growth is mortgage related, with the pace of borrowing accelerating. While consumer credit advanced, the pace of growth continues to decelerate.

Canadian Households Owe Over $2.24 Trillion In Debt

Canadian household debt reached a new high, but growth is a little stalled. The balance of household debt reached $2.24 trillion in September, up $82.0 billion from last year. The increase represents a rise of 3.8%, when compared to the same month last year. The pace of growth has stalled, as consumer credit growth continues to slow.

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.

Mortgage Debt Is $1.6 Trillion of The Debt

The vast majority of household debt is tied to mortgages in Canada. Mortgage debt represents $1.60 trillion of the September balance, up $63.8 billion from last year. This represents an increase of 4.2%, when compared to the same month last year. The accumulation in September is also 16.7% higher than last year. Mortgage debt growth is accelerating, despite demands for a looser borrowing criteria.

Canadian Household Debt Outstanding In Dollars

Total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

Consumer Credit Growth Is Slowing

Canadians are shying away from consumer credit, which is slowing in growth. The balance of consumer credit reached $639 billion in September, up $18.2 billion from last year. This represents an increase of 2.9%, when compared to the same month last year. Consumer credit growth is around 21.6% slower than it was during this time last year. It’s unusual for consumer credit to slow, while mortgage credit grows.

Canadian Household Debt Change

Annual percent change in debt held by Canadian households.

Source: Bank of Canada, Better Dwelling.

Cheap borrowing normally increases all forms of household credit growth. After all, the goal with cheap money is for all industries to experience growth. However, that’s not what we’re seeing happen at this stage of the market. Instead, mortgage credit is accelerating, while consumer credit is slowing. The divergence hasn’t lasted long historically.

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10 Comments

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  • Quan 2 weeks ago

    You can tell the Bank of Canada now thinks its just a housing economy, since they’re only helping to provide liquidity for mortgage bonds. Other forms of borrowing discouraged, but borrowing for a home encouraged… even at this debt level.

  • Karm 2 weeks ago

    Retail sales are in the dumper. As per the thread in the forum, if home sales aren’t resulting in the spin off activity, they’re now trending 100% in toxic territory. That’s no beuno.

    https://www.investingcube.com/usdcad-rises-as-canada-core-retail-sales-show-a-surprising-slump/

    • Ethan Wu 2 weeks ago

      FYI, save people a search trying to find the business confidence survey. It looks like firms are reporting shrinking sales.

  • Trader Jim 2 weeks ago

    Second slowest household credit growth for September since the near collapse of the currency is what I believe you meant to say.

  • Jupiter 2 weeks ago

    When will these idiots learn, Canada have lots of land very low population and high taxation. There is no reason for these real estate prices. With these price levels we will see massive political and social unrest very soon.

    Drop housing price now or everyone pays the final price except those spectaculars how can just fly back to their own country. This housing price benefits foreign speculators and hurts Canadian families.

    • straw walker 2 weeks ago

      Canada has very little livable land. unless we can convince these thousands of immigrants to live in the Arctic .
      90% of Canada’s population lives within 100 miles of the US border… no room, therefore our population is huge

    • Roger Troutman 2 weeks ago

      ‘Drop housing prices now’.

      lol who are you talking to, your computer screen? Quit blaming foreigners, go save some money and buy that nice bungalow in Winnipeg where land is aplenty as you state.

  • 6ix 2 weeks ago

    we sold only 42000 in the past 12 month period. But YoY Mortgage growth is about 62 billion, that means our average mortgage size ~1.4 M, some thing is wrong

    • Adam 2 weeks ago

      Probably a bit higher considering the 62B does not factor in private mortgage debt which is increasingly used as borrowers GDS/TDS don’t pass the test.

  • Fraser 2 weeks ago

    this is sad and will not end well…most of here now, can not buy a house at these crazy prices…no thanks

Comments are closed.