Canadian Mortgage Credit Is Seeing Growth Surge, Despite Slow Real Estate Sales

Canadian mortgage debt is swelling, despite the freeze on home sales. Bank of Canada (BoC) data shows mortgage credit made the biggest jump in a decade for April. The rise is somewhat unusual, since dollar volumes for home sales haven’t increased much. Even though resale and new home markets have slowed due to the pandemic, mortgage debt is showing huge growth.

Canadian Mortgage Credit Rises To Multi-Year High

Residential mortgage credit outstanding is pushing higher, and at a very rapid pace. There was $1.65 trillion in mortgage credit outstanding in April, up 0.60% from the previous month. This represents a 5.8% increase when compared to the same month last year. That’s very high growth for the past few years, and even more so during a pandemic.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

In fact, the rate of growth for both the monthly and year-over-year numbers are the highest in a long time. The monthly increase of 0.60% is the biggest for April since 2009. The 5.8% is the highest year-over-year growth since August 2017. Part of this is due to mortgage deferrals – over one in ten mortgages are no longer making payments. If there’s no payments to reduce the balance, the total swells more easily. The year-over-year comparison is also to a period of unusually low growth.

Mortgage Credit Growth Expected To Continue Rapid Expansion

Even with the fast rate of growth, there’s indication credit growth will continue to speed up. The 3-month annualized rate of growth spiked to 7.4% in April, making a sharp increase from last month’s 6.5%. This is the highest 3-month annualized rate of growth since October 2011. Since the 3-month annualized rate leads the year-over-year, this means expect more growth. Although it doesn’t necessarily mean a rapid economic expansion, like it typically would.

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.

Mortgage credit growth accelerating while home sales are on hold is an odd dynamic. Credit growth acceleration is usually considered a positive. A nod to both the amount banks are lending, and consumers confident enough to borrow. However, the data and narrative are contrary this time, creating a bit of an issue.

Mortgage deferrals are behind a significant portion of the balance increase. Payment deferrals on insured mortgages are at 12% of mortgages, and expected to rise to 20% by September. The total market is currently seeing about 15% of mortgages on payment deferral. This means many mortgages are seeing balances rise due to a lack of payment, instead of new borrowing. Exiting debt rising in part to much more interest accumulation, is a little different from new debt creation.

Like this post? Like us on Facebook for the next one in your feed.



We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Trader Jim 4 years ago

    The Bank of Canada’s first move was to lower interest rates, so homeowners could refinance and take out living expenses.

    That should sound familiar, because this is what the US did during their housing bubble pop. In the end, the average homeowner’s net-worth was the same off as before the price increase, due to lost and spent equity.

  • Jamie 4 years ago

    Commercial real estate has no impact on residential.

    • Yusef 4 years ago

      People don’t pay to be around things? They just like being concentrated in a small area, with proximity to nowhere?

  • Joseph 4 years ago

    Yup, I’ve always had a big belief that homes are being built at sub-par quality for the last 5-10 years. This is simply based on what I have seen over this time. I specifically look for this type of thing. There ard a couple of good builders, but you need to make sure you look for them.

    The one piece I often overlook, which you mention, is the build sizes. Things are getting smaller and smaller, especially in condos. But a price decrease isn’t reflected. It’s sctually been the opposite (thereby proving product scarcity over quality/product as the biggest driving factor for houses).

    It’s similar to the chip and chocolate bar companies deviously dropping the size of their products by 5 grams here, 5 grams there. Then all of a sudden, they come out with the same product in super size format. Meanwhile, that supersize format is the same weight as the product was a few years back, but now costs more due to the “bonus” increase in size.

  • straw walker 4 years ago

    Mortgages deferrals rising are not a good sign especially for small regional banks. Small regional schedule “1” banks are now setting aside up to 13% reserves to cover mortgage failures and unsecured loans but will this be enough.
    Many of these small banks took on sub prime mortgages to get higher rates, but these mortgages have now been in furlough, and represent nearly 20% of their mortgages.. These numbers will certainly increase, so will 13% reserves be adequate??
    The bigger problem is if there is a run on the bank 13% would disappear in a heart beat.

  • Manoj 4 years ago

    The past 30yrs, Canadian governments and politicans have used a one trick pony to keep them in power. And that is keep inflating the housing market. It is an age old tactic. When house prices rise, it creates a feel good factor amoungt the home owners and more will join the party. The CMHC was founded to goose up the housing market by providing taxpayer funded guarantees to the lenders.

    Now they have shutdown the economy and made everyone stay at home and paying them basic income to survive and rent and mortgage deferrals. This will lead to yet more debt.

    Without debt, the economy cannot function because besides real estate Canada produces very little and the oil industry has been killed off by the climate change and federal government policies and whatever oil is being shipped to the US is being sold at a LOSS. So the only game in town is the Real Estate Market. The banks have not lent any money to small busineses so the economic engine of the country has been slowing down and now has been totally killed off by the shutdown. Small businesess create 70% of the employment.

    Insterestung times we live in.

    • Paul 4 years ago

      Climate change is not devaluing oil. If you don’t know what you are talking about stick to Twitter.

  • zalzon 4 years ago

    Lower interest rates and print money
    Lie about CPI numbers to hide the real inflation numbers
    Do backdoor bailouts
    Do “stimulus” (aka run up national debt) which benefits a select few but which others have to pay off.

    Really i wonder what organizations like Bank of Canada, CMHC, OFSI…etc are even paid for.
    Its almost as if they find creative ways of wrecking the economy.

    They should make me chairman of one of these places.
    I can hit one of the above buttons anytime i need to “fix” a situation.

  • Renter 4 years ago

    Things to be expected in the future.

    Couldn’t ride the wave though the RE business. In 2007-08 every other person you met in FL was a RE agent .

Comments are closed.