Canada is experiencing record population growth but unusually slow mortgage growth. Bank of Canada (BoC) data shows that outstanding residential credit growth slowed even further in November. It marked the slowest rate observed by Canadians in over two decades.
Canadians Owe $2.26 Trillion In Residential Mortgage Debt
Canadian mortgage credit continues to advance despite elevated mortgage rates. The balance of outstanding residential mortgage credit climbed 0.2% (+$4.9 billion) to $2.2 trillion in November. This represents a 3.4% increase (+$70.1 billion) compared to the same month last year.
It may sound like a lot, since borrowing debt for housing is practically a religion in Canada. However, this is yet another month to print slower growth.
Borrowing Is Slowing Even Further Despite Falling Fixed Rates
Despite reports of increased activity in November, mortgage credit did not reflect this trend. Annualized growth was 0.1 points lower than the month before, and came in less than half (-56%) compared to last year. It’s not just slow compared to recent data, this is a generational slowdown.
Canadian Mortgage Credit Experiences Slowest Growth Since 2001
Annualized growth of outstanding Canadian residential mortgage credit, in percentage points.
Source: Bank of Canada; Better Dwelling.
It’s Been Over 20 Years Since Mortgage Debt Grew This Slow
A generation of Canadians reached adulthood since that last time borrowing was this slow. To see such a low annualized growth rate, we need to go all the way back to 2001. Back then, the economy wasn’t in a particularly great spot. A combination of the Dotcom Bubble bursting and an oil recession hit the country. It also happens to be the last time the Bank of Canada overnight rate was around the current level—though it was on its way lower at that point.
The slowdown of mortgage credit and rising inventory is somewhat contradictory to population growth. Although the population is rising at a record rate, the surge isn’t translating into more residential mortgage borrowing. That may be a strong indicator that despite limited housing options, Canadians can’t exactly stomach prices at these levels. It remains to be seen if cheaper debt can change that.
Most Canadians don’t have the insanely high credit scores or down payments required by banks. I have a government job and make a high five figures a year with loads of disposable income. Banks still won’t even entertain the thought of a mortgage for me even though I could make double the required mortgage payments per month. Late stage capitalism at its finest.
When builders decide not to be so greedy, the units will sell
I’m curious if the mortgage growth includes the growth through negative amortization that is due to the fixed payment variable rate mortgages making up roughly 20% of the bank portfolios. If that is the case, this is potentially much worse than the article initially suggests.