Canada

Canadian Mortgage Credit Sees Growth Slow, Despite Record Real Estate Sales

Canadian real estate sales are hitting record levels, but mortgage growth is slowing. Bank of Canada (BoC) data shows outstanding mortgage credit hit a new all-time high in July. Even with the new high and various factors working in its favor, the rate of growth is still decelerating.

Mortgage Debt Reached Over $1.69 Trillion In July

Canadian mortgage credit reached a new record high last month, jumping by half a point. The balance of outstanding credit reached $1.69 trillion in July, up 0.47% from a month before. The increase brings the balance 5.52% higher than the same month last year. The record high came with substantial growth, but it is continuing to cool.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

Despite record sales in the month, mortgage credit growth has been slowing. The 5.52% 12-month growth is the second consecutive month of deceleration. This was expected due to the comparison period. The first half of 2019 was extremely slow, with most mortgage credit growth pushed to the second half. As we approach a more normal period of growth, we should see this balance a little more.

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.

There’s still a whole lot of mortgages on payment deferrals. Banks reported 16% of mortgages were still deferred at the end of July. On earnings calls last week, many banks stated deferrals have begun expiring, and people are transitioning back to regular payments.  This is likely to contribute to lowering future outstanding mortgage growth.

Mortgage credit growth slowed, despite July being a record month for sales. This is possibly an indication that smaller mortgages are being taken out, as luxury lags. There’s a number of factors working in favor of higher credit growth, including deferrals and rock bottom rates. Even with those factors, the expected slowdown is still carrying on.

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6 Comments

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  • Whiskey Foxtrot 4 weeks ago

    Everyone’s flocking to cheap suburban homes. Driving prices up, but they’re still cheaper than buying in the city.

    • alvi 4 weeks ago

      905 homes are not that cheap in many cases and 416 lowrise still on fire. I

      • MC 4 weeks ago

        on fire for the mortgage money?

        • questionguy 4 weeks ago

          ha!

        • alvi 4 weeks ago

          Poor use of a metaphor,I admit, more appropriate for governments who are burning through their budgets placating the civil service and vote-buying all at the expense of future generations

  • Fight Back 4 weeks ago

    Anyone who props up real estate price is the enemy of Canadians. We are basically using Canada’s future to enrich real estate speculators. People who only own one home and live in it will not suffer even if prices fall 50%. Infact the price to upgrade to a better home will be lower instead.

    The question is who is the government propping up real estate!

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