Canada’s mortgage debt binge is accelerating to the fastest pace in years. Bank of Canada (BoC) data shows mortgage debt reached an all-time high in September. The record high came with abrupt, accelerated growth, due to pent up demand.
Canadian Mortgage Debt Tops $1.71 Trillion
Canadian mortgage debt held by institutional lenders surged to a new high. The balance outstanding reached $1.71 billion in September, up 0.90% from the month before. Compared to the same month last year, this represents a 5.67% increase. It’s not just a new record, but a huge acceleration for growth.
Canadian Outstanding Mortgage Credit
The outstanding balance of Canadian mortgage credit.Source: Bank of Canada, Better Dwelling.
Canadian Mortgage Debt Is Growing At The Fastest Pace Since 2018
The rate of growth actually shows an unusual spike higher. The 5.67% annual rate puts an end to 3 consecutive months of deceleration. It also puts the rate of growth at the highest level since April 2018. Eye popping growth in the middle of a pandemic may be shocking, but it should be expected.
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.
The Surge Is Due To Pent-Up Demand
The unusual surge makes a little more sense in the context of record sales. The pent-up demand, a.k.a. delayed sales from the lockdown, are driving borrowing. Since the comparison period has shifted, we’ll also see an unusual growth pattern. This is similar to the reason we’re seeing massive sales. This shifted comparison period is also why we’ll see unusually “slow” sales next year.
Not a big surprise, an unusual year is printing unusually large and abrupt growth. The shifted comparison period is expected to return to normal as pent-up demand catches up. This should bring growth levels to more recent levels. The end of the BoC program to buy bonds may also increase mortgage rates, providing another moderation weight on growth.
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