Canadian mortgage credit continues to slow as rising rates grind the market to a halt. Bank of Canada (BoC) data shows outstanding residential mortgage credit rose in November. However, it was one of the slowest months we’ve seen since 2020. Annual growth remains robust, but recent activity is bringing the trend lower.
Canadian Mortgage Debt Topped $2.08 Trillion… Just For Housing
Canadian mortgage debt is still climbing, despite being a monumental pile. Outstanding residential mortgage credit reached $2.08 trillion in November 2022. The balance added 0.3% (+$5.9 billion) in the month, and is 7.6% (+$147.5 billion) higher than last year. It’s a record high balance, but after hitting new highs for 131 months? That’s hardly news. A big change in the monthly growth pattern? Now that’s interesting.
Canadian Mortgage Debt Hits A New Record High
The outstanding balance of Canadian residential mortgage credit owed to institutions.
Source: Bank of Canada; Better Dwelling.
Canadian Mortgages Had One Of The Slowest Months Since 2019
Monthly growth showed a minor improvement, but it’s fairly anemic for Canada. November’s growth (0.3%) was slightly higher than October (+0.2%), but not by much. Outside of these two months, monthly growth hasn’t been this low since 2019.
Annual Growth Is Slowing, But Remains Very High
Of course, those slow months are following some of the biggest growth ever seen. Since peaking in February 2022, annual growth has slid nearly every month. With November coming in at 7.6%, it’s still very, very high growth for debt to accumulate.
Canadian Mortgage Debt Growth
The annual growth rate of Canadian residential mortgage credit.
Source: Statistics Canada; Better Dwelling.
Annual growth dropped to the lowest rate since February 2021, though that was still high. Prior to the pandemic, we hadn’t seen mortgage credit accumulate at this rate since 2011. Back then, the pile was nearly half the size and much easier to grow. Now we’re talking about a mortgage debt pile around the size of Canada’s GDP, growing at more than double the rate. Even a much lower rate than the peak is problematic from an economic growth standpoint.
Higher mortgage rates played a big part in slowing growth, as it reduced leverage. However, mortgage rates might be close to reaching a peak this cycle. The Government of Canada (GoC) 5-year bond yields have been rapidly declining. Since the GoC 5-year yield directly influences 5-year fixed rate mortgage interest, those mortgages should be coming down as soon as the risk premium subsides.
Just remember that cheaper credit doesn’t mean pandemic-era, emergency rates. Experts don’t see a surge in demand, or rising home prices, for at least a few years.