Canadian Mortgage Credit Rips To Highest Growth In Nearly 2 Years

Canadian real estate buyers are back in full force, and pushing debt levels once again. Bank of Canada (BoC) data shows mortgage credit reached a new all-time high in December. The all-time high isn’t surprising anyone these days. However, the pace of growth is now at the highest level in almost two years – and is likely to climb further.

Canadian Mortgage Debt Rises To $1.62 Trillion

Canadian mortgage debt held by institutional lenders ripped higher at year end. The outstanding balance reached $1.628 trillion in December, up 0.74% from a month before. This represents an increase of 4.9%, when compared to the same month last year. Not only is this an all-time high, the 12-month rate of growth is accelerating very quickly.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

The rate of growth is much faster than last year, and is rapidly rising. The 12-month increase of 4.9% marks the ninth consecutive month of acceleration. This past December was 48.48% higher than a year before, and is the highest 12-month growth rate since March 2018. It’s been almost 2 years since we’ve seen growth like this, and it’s almost at pre-B-20 Guideline levels.

Canada’s Mortgage Growth May Be Heading Higher

The annualized pace of growth indicates we’re going to see this rate climb a little more. Annualizing a short-period is taking a short-period, and projecting it as if it were the whole year. This helps analysts determine if short-term growth is relative to the annual trend. If the annualized trend is higher, expect the 12-month growth to climb. If the annualized trend is lower, expect the 12-month trend to move lower. Simply put, the 12-month trend is perpetually chasing the shorter, annualized trend.

The 3-month annualized rate of growth is pointing to a substantial climb. The rate increased to 6.7% in December, more than double what it was last year. It’s now at the highest level since October 2016,  which was a very big month for mortgage credit. Now this doesn’t indicate we’re going to see 2016-levels of growth. It does mean we’ll see the 12-month trend climb for at least a few months.

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 end of the year printed some big numbers for mortgage credit growth. It’s skewed a little due to the unnaturally low mortgage growth a year before. Some of this is delayed demand, which should flatten out as the year progresses. However, it’s still the highest level of growth in nearly 2 years, preparing to climb even  further. The bank regulator has also noted a return of highly indebted borrowers in the market.

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  • Trader Jim 4 years ago

    If you’re wondering why the banks are still scrambling over low growth, it’s because most of this has to do with the large number of completions.

    December was the biggest month for completions since July 2019. December 2018 and 2019 were also the most completions for December in a very long time. Combine that with a return to normal sales, and you’ve got a pretty print. Since starts are dropping, there’s going to be a trough at some point for their loan book.

  • Jay 4 years ago

    “better-than-sluggish growth in 2020 is going to require stimulus of some kind.”

    Sounds like a great time.

  • CD 4 years ago

    It’s like being at a great party where the clock stops ticking at midnight but the fun just keeps going.

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