Canadian Mortgage Credit Continues To Slow, Credit Card Debt Surges

Debt-crazed Canadians may not be borrowing to buy a home, but they are borrowing—a lot. Bank of Canada (BoC) data reveals outstanding mortgage credit made a small climb in December, at an unusually slow pace. Mortgage debt is now growing at the slowest rate in over two decades, with home prices now firmly placed out of reach for most. That isn’t stopping households from borrowing though—they’re just embracing home equity and credit cards, and balances for both segments are rapidly accumulating. 

Canadian Mortgage Debt Is Growing At The Slowest Rate Since 2001 

Canadian mortgage debt continues to rise, but barely. Outstanding mortgage credit climbed 0.3% (+$6.0 billion) to $2.16 trillion in December. Annual growth came in at 3.2% for 2023, marking the slowest 12-month period since April 2001—over two decades ago, during a particularly rough recession for Canada. 

It really needs to be seen to appreciate how unusually slow mortgage borrowing has been. 

Canada’s Credit Bubble Continues To See Growth Slow

Canadian household mortgage and non-mortgage credit annual growth rates.

Source: Bank of Canada. Statistics Canada.

Canadian Mortgage Credit Had One of The Slowest Decembers Ever

Despite the discussion of the market picking up, borrowing data did not reflect that trend. The national statistics agency specifically called out that households drove just $1.5 billion in additional loans in December. That’s about half the amount seen a year prior, one of the slowest December on record. In fact, one had to go all the way back to January 2019 to find any month that came in this slow. 

Canadian Household Mortgage Debt Growth

The monthly change in outstanding residential mortgage credit owed by households, in Canadian dollars.

Source: Statistics Canada; Bank of Canada.

Canadians Are Racking Up Huge HELOC & Credit Card Balances

Don’t let the mortgage debt fool you, households haven’t given up on borrowing yet. Non-mortgage credit grew 0.4% (+$0.9 billion) to $750 billion in December. That helped to push annual growth to 2.5%, an acceleration of 0.3 points from a month before. It’s still smaller then inflation but there was acceleration. Where this debt is coming from is also fascinating.

There are two major segments of household non-mortgage credit—home equity lines of credit (HELOC) and credit cards. HELOC debt rose 0.5% in December, printing the largest monthly growth since May 2022. It also happens to be nearly double the rate of monthly mortgage credit growth—not exactly a great sign. 

Credit card debt is where Canada’s borrowing talent really shines. Balances  at chartered banks climbed 1.1% (+$1.1 billion) to $105 billion in December. This represents a 12.6% increase from the same month last year. Canadians are seeing their credit card debt rise at nearly 4x the growth rate of mortgage debt. While the outstanding balance is smaller, it’s not often that people consider their credit card purchases to be an “investment.” 

Canadian mortgage credit is rising at an unusually slow rate despite the uptick in existing home sales. This is likely attributable to a combination of weak new construction sales and lower prices, as higher rates force sellers to embrace smaller budgets.  

At the same time, more attention should be turned towards the rising credit card debt households are accumulating. Even in the best of times, this kind of debt typically has substantial interest costs that can accumulate. It’s one thing if people are financing discretionary spending, which can be seen as a healthy sign. It’s another if this how households are closing the gap between a surging cost of living and modest wages. We’ll dive further into this trend on another day.