Canadian Mortgage Credit Is Seeing Explosive Growth… Again

B-20 what? Never heard of him. Canadians are in a rush to take out mortgage credit once again. Bank of Canada (BoC) data shows a major jump in borrowing. The increase is some of the highest growth for mortgage debt, and is primed to explode even higher.

Canadian Mortgage Debt Grows At The Fastest Rate In Over A Year

Canadian mortgage debt held by institutional lenders made a huge leap. There was $1.61 trillion in mortgage debt outstanding in October, up 0.56% from a month before. That brings the balance outstanding 4.5% higher, when compared to the same month last year. This is both a new record for the dollar amount, and a multi-month high for growth.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

The rate of growth is accelerating very quickly, going into the winter. The 12-month growth of 4.5% for October, is 28.57% more growth than a year before. It’s also the highest print since May 2018, and marks the seventh consecutive month of acceleration.

Mortgage Credit Has Seen Explosive Growth Recently

Annualized growth over the past few months shows how fast the recent movement has been. Basically, a short-period of data is taken, and projected as though it were a whole year. This tells us how fast things are moving in the short-term, versus the current 12-months of growth. If the annualized shorter period is larger than the 12-month, expect growth. If it’s smaller, expect contraction. The BoC uses 3-months most commonly, so that’s what we’re going to use as well.

The annualized 3-month rate of growth shows it’s exploding higher than last year. The 3-month annualized rate hit 5.7% in October, over 26% higher than the current 12-month rate. This is the highest this annualized period has been since July 2017. That’s before B-20 demand “slowed” things down, in case you were reaching for your calendar.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change, and 3 month annualized change, of outstanding Canadian mortgage credit at large institutional lenders.

Source: Bank of Canada, Better Dwelling.

The most likely reason for the jump is buyers delayed by B-20 Guidelines are jumping in. The mortgage brokerage industry had expressed this would be the situation. After all, we know that people will still buy a house at some point, even if borrowing becomes more difficult. They buy a house when they’re more financially prepared to qualify. Delayed buyers are likely joining existing demand, printing large short-term growth. Now does this turn into FOMO, and stimulate further demand for a longer period?

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  • Jason Chau 4 years ago

    Check out the 12-month growth. It’s rising, but in a way that normally happens after US recessions have passed. One of the issues with monetary policy decisions that are contrary to lending decisions – you’ve just broken most historical comparisons.

    The artificial drop caused by B-20 was much more steep that it had to be, which means it’s continue to average lower, just with more extreme walks.

    • Rob Turner 4 years ago

      They’re protecting the banks before the consumer. As an investor, I agree with this logic. As a consumer, I’d be a little more angry.

      The real estate industry complained about this measure, like it was meant to target them. In reality, it was a measure designed to prevent loan loss exposure from turning too high.

      • Mortgage Guy 4 years ago

        Rising insolvencies are no joke either. October bump was big, and that wasn’t covered by the quarter we just had.

        Granted, not all of these consumers loans are going to be with Canadian banks. Also important to remember your mortgage is the last thing you default on.

  • Ahmed 4 years ago

    TD and CIBC both missed their quarterly earnings due to rising loan loss provisions. This is no beuno.

    • Yan 4 years ago

      When your bank prepares for you to lose money, but you’re running into more borrowing. haha

  • Ian 4 years ago

    Downtrend still in tact for now. Going to be a few years before this trend can actually change direction.

    Everyone is jumping on trend reversion, with nil time between.

    • Ian 4 years ago

      Important to add, an uptrend and prices aren’t necessarily the same thing. Credit utilized by marginal buyers can distort prices much higher than people think.

      • Lawrence J 4 years ago

        Unrelated, but how do I add images?

        • Ian 4 years ago

          Create a login. It gives you access to WYSIWYG editor.

  • Sophia 4 years ago

    I find info on this site absolutely useless with regards to making a decision on the real estate (eternal dilemma , should I buy , should I rent..should I be homeless?)

    • Ethan Wu 4 years ago

      You’re looking for a financial advisor, not financial reports. Two different things.

      The information is best used by people that are looking to learn about their allocation, in my experience. i.e. Should I buy another investment property, or should I buy more stocks.

      If you don’t get the basics of opportunity investment costs, and you’re looking for a direct decision made by someone else, the only one you’re going to get is buy a house – and that decision is going to be made by someone that wants to make a commission off the sale.

    • Luigi Vampa 4 years ago

      Unfortunately for you, thats not the point of this.

  • John 4 years ago

    That’s because this site isn’t for or by a realtor. This site is by data analysts that are reporting on financial trends.

    More broadly, the internet is going to tell you what you want to hear. Realtor’s are always going to tell you to buy. They only make money if you buy.

    You can afford to buy a home, plan to stay in it for 20 years, and don’t have to stretch yourself thin? Buy. Don’t know if you can buy or not, pay a financial adviser a fee to go over your financials.

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