Canadian Mortgage Credit Growth Finally Falls To Pre-Pandemic Levels

Canadian mortgage debt is slowing in growth, after a surge at the beginning of the pandemic. Bank of Canada (BoC) data shows outstanding mortgage credit reached a new high in August. At the beginning of the pandemic, the rate of growth had accelerated due to payment deferrals. Deferrals are beginning to expire now, sending growth back down to pre-pandemic levels.

Canadian Mortgage Debt Reaches $1.69 Trillion

Canadian mortgage debt reached a new record high, but the rate of growth is finally starting to slow down. The outstanding balance at institutional lenders reached $1.69 trillion in August, up 0.63% from a month before. Compared to the same month last year, this represents a 5.23% increase. Substantial growth, but there’s a lot to unpack with these numbers during pandemic relief. 

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

Mortgage Credit Growth Drops To Pre-Pandemic Levels

The rate of growth is finally slowing down after seeing a surge earlier this year. The 5.23% growth seen in August is the third consecutive month we’ve seen deceleration of growth. It’s still much higher than the 4.01% seen last year, but not quite at levels when real estate sales were booming in 2017. The slowing growth is likely to continue going forward, even with strong home sales.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change of outstanding Canadian mortgage credit at large institutional lenders.

Source: Bank of Canada, Better Dwelling.

Part of the reason mortgage credit is slowing in growth is the end of mortgage payment deferrals. Payment deferrals mean no payment against principal, but accumulation of interest. The hundreds of thousand of accounts on deferral, made it very easy to see total balances rise. While banks were allowed to give up to six months of deferrals, many didn’t offer that out of the gate. Some had only given one or two months, and others like Scotiabank capped it at 4 months. As deferrals expire, like we’re beginning to see, growth in mortgage debt should slow as well.

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  • Thuy 4 years ago

    Big spike in mortgage refinancing withdrawals too. Debt management issues are cropping up.

    • Trader Jim 4 years ago

      Big spike? Equity withdrawals were as big as HELOCs last year.

  • Kolf 4 years ago

    Its in every bank’s interest to not allow mortgage deferrals on ‘investment’ properties and people with multiple mortgages. They need to foreclose and sell those investment units before the wave it. This is from someone with lots of risk management experience in financial industry. You need to get analytics to find most likely to default clients and not extend deferrals. Put those investment properties on the market BEFORE the default wave hits.

    • Groot 4 years ago

      I agree. Attitudes towards residential real estate in this country also need to change. Residential Houses are meant to be purchased for owner occupancy and not outright investment. We also need a better regulatory framework for private lenders such as MICS, tighten and clamp down on foreign residential real estate ownership even more, and bring in a vacancy tax across the board. The only exceptions to the rules above are Commercial, Agricultural, and mixed use properties as these are true investment grade.

  • Az Sah 4 years ago

    Government is not willing to let this sector free fall but for LT financial stability, the problem clients need to be identified. Time to take corrective decisions.

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