Canada

Canadian Mortgage Credit Growth Is Rapidly Accelerating, While Consumer Credit Slows

Canadian households are in a rush to get more debt, but only for mortgages apparently. Bank of Canada (BoC) data shows household debt reached a new all-time high in December. In general, household credit growth is rising. However, the rise in growth is due entirely to mortgages, where the rate of growth is rising at the fastest pace since before the Great Recession.

Canadians Owe Over $2.27 Trillion In Debt

Canadian household debt held by institutional lenders hit a new high. The outstanding  balance reached $2.27 trillion in December, up 0.62% from a month before. This a 4.2% increase compared to the same month last year. Over the past few months, the growth rate has been accelerating once again. The current 12-month rate of growth is the highest since May 2018.

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 Driving The Growth Trend

Mortgage debt is where the bulk of the growth is coming from these days. Mortgage credit outstanding represented $1.63 trillion of debt in December, up 0.74% from last year. This works out to an increase of 4.9% when compared to the same month last year. This was the highest 12-month growth since March 2018, and the fastest acceleration of the trendline since before the Great Recession. Canadians are in a rush to borrow mortgage cash.

Canadian Household Debt Outstanding In Dollars

Total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

Consumer Credit Growth Falls To Nearly Zero Real Growth

Households aren’t all that keen on borrowing other types of credit though. Consumer debt represents just $641 billion of the debt pile in December, up 0.31% from a month before. Compared to last year, this is an increase of 2.4% compared to the same month last year. This is the slowest 12-month increase for the month of December, since 2013. With CPI coming in at 2.25% in December, this is nearly zero real growth.

Canadian Household Debt Change

Annual percent change in debt held by Canadian households.

Source: Bank of Canada, Better Dwelling.

Canadians are borrowing once again, and at a rapid pace. However, this is a very unusual and possibly toxic trend. Normally cheap credit flows into all aspects of borrowing, and confident consumers drive all segments. However, all of the household credit growth’s acceleration is due to mortgages. This might imply more of a FOMO based trend, than a booming economic one.

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2 Comments

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  • Mortgage Guy 2 months ago

    My two cents: The FOMO is real. If you keep your house over the long run, odds are in your favor you won’t lose money.

    More important though, is make sure you aren’t sacrificing your budget today to get in an emergency. Just because you don’t lose money, doesn’t mean you shouldn’t be contributing to other investments.

    Most of your wealth will be built by compounding. If you delay diversification, you’ll be stuck in the same trend as boomers, living on reverse mortgages.

  • Holton 2 months ago

    This is what happens when you dont suppress housing prices. You are either saving all ur disposable income for down payment or paying mortgages. It increases leaverage and hence risk to the entire economy and at the sametime kills off consumption. This is the worst combination you can have.

    High housing cost is like a virus, first its Vancouver then Toronto now its spreading to most of Canada. If you are smart you would leave Canada before this whole thing blows up. The government dont want housing prices to go down.

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