Canadian households are taking advantage of the cheap debt flooding the mortgage market. Bank of Canada (BoC) data shows outstanding mortgage credit reached a new high in January. The total size of the debt pile isn’t just a shocker at this point. Over the past year, accumulated mortgage debt was more than 5% the size of the country’s GDP. One. Year.
Canadian Mortgage Debt Now Over 85% of GDP
Canadian mortgage debt started the year with a record total, which doesn’t surprise. Outstanding mortgage credit reached $1.66 trillion in January, up 0.41% ($6.82 billion) from the month before. This represents a 7.19% ($111.12 billion) increase compared to the same month last year. These are very large numbers, so the growth might be lost on some people. The balance of residential mortgage credit is just over 85% of GDP. Mortgage credit is huge for the size of the country’s economy.
Canadian Residential Mortgage DebtThe outstanding dollar amount of residential mortgage credit held by Canada’s instituional lenders. Source: BOC, Better Dwelling.
Canadian Mortgage Debt Is Growing At The Fastest Rate In A Decade
The monthly and annual growth are the fastest seen in years. It was the biggest monthly increase for a January since 2017. It was also about half of the growth seen in October’s recent peak, but it’s also a winter month. Still, worth keeping an eye on this number to see if it can ramp up to that level again by Spring.
Canadian Residential Mortgage Debt ChangeThe 12-month percent change in the outstanding dollar amount of residential mortgage credit held by Canada’s instituional lenders. Source: BOC, Better Dwelling.
The annual rate of growth is at a multi-year high. January’s 7.19% growth marks the 8th consecutive month of acceleration. There’s been 22 months of acceleration, if you exclude a single blip in May 2020, at the onset of the pandemic. This rate hasn’t been this high since October 2011, when it fell from the Great Recession’s bump.
Mortgage Debt Increased By The Equivalent of 5% of GDP
The increase in dollars is unprecedented, and not just because of the total size of the debt pile. At the end of January, outstanding mortgage credit had increased by $111.12 billion. In terms of relative scale, it’s the equivalent of more than 5% of GDP at the annual rate. It almost creates an unnatural looking vertical line when charted.
Canadian Residential Mortgage Debt ChangeThe 12-month dollar change in the outstanding amount of residential mortgage credit held by Canada’s instituional lenders. Source: BOC, Better Dwelling.
Canada’s easy mortgage credit policies have led the debt to grow at the fastest pace in almost a decade. Whether that’s a good or bad thing is the subject of much debate. On one side, the BoC is thrilled because it’ll lead to inflation. On the other, economists say inflation can’t accurately capture the home price growth. The situation is also starting to be viewed as a debt trap, with few ways to navigate without causing pain.
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