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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