Canadian Mortgage Credit Sees A Sharp Uptick To Highest Growth Since 2018

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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  • Trader Jim 4 years ago

    Mortgage credit growth and its spin off activity has to be a good 20%+ of GDP now?

      • The Truth Shall Set You Free 4 years ago

        Based on that uptick might be over 90% now. Either way based on history this isn’t going to end well. The correction from 1989 through 1996 will look like nothing once this correction is done.

        • Trevor 4 years ago

          Unless the correction occurs in the currency and not the real estate market. That’s happened in plenty of developing countries. The bank of Canada is working hard at devaluation.

          • The Truth Shall Set You Free 4 years ago

            Since when was Canada considered a developing country?

        • Ray 4 years ago

          what kind of correction are we looking at. Sorry not sure what the data looks like for 1989~1996.

        • Tony 4 years ago

          With the way debt levels are increasing and the bank is printing money it may get to developing status sooner than you think and unlike the us we don’t have the privilege of having a reserve currency we won’t see it during the pandemic but one of the X variables is inflation and how that will come about in the future

  • Jimmy 4 years ago

    Since we had the largest gov’t deficit as percentage of GDP in the world.

  • question guy 4 years ago

    uh… looking at the chart, the increase was far from “huge” – it’s barely a blip.

    I get it – even more debt is bad, and yeah it’s small but on a bigger base, but it’s at the low end of the chart, so to me this is just business as usual.

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