Canadian mortgage borrowing is improving, but don’t mistake it for a rebound. Bank of Canada (BoC) data shows household mortgage credit grew in June—marking the third consecutive month of acceleration. Growth is slow and steady, but it still resembles a recession more than a recovery.
Canadian Mortgage Debt Hits $2.3 Trillion, But A Recovery Still Far Away
Canadian household mortgage debt in trillions of dollars.
Source: Bank of Canada; Better Dwelling.
Canadian debt grew faster than last year, but it was still uncharacteristically slow. Households added 0.55% (+$12.45 billion) in mortgage debt to push the outstanding balance to $2.30 trillion in June. Monthly growth has accelerated for the past three months, revealing improved sentiment. However, improved isn’t the same as recovered, and there’s no market boom at this vantage point.
June was larger than last year, but only four years saw the month come in lower over the past 25 years: 2024, 2018 (Ontario foreign buyer tax rollout), 2003 (oil patch recession), and 2000 (dot-com bubble). It’s worth exercising caution when an improvement can be easily mistaken for performance during a recession.
Canadian Mortgage Growth Is Picking Up As 2020-2022 Pre-Construction Boom Turns Into New Home Completions
Canadian household mortgage debt 12-month change in percentage points.
Source: Bank of Canada; Better Dwelling.
Canadian mortgage borrowing is on the slow and steady path to recovery. The outstanding balance in June 2025 was 4.74% (+$103.8 billion) higher than last year, a sharp increase. The annual growth rate appears to have encountered some friction at this level, but it’s remained roughly the same since March. The recent year-over-year trend is the strongest since mid-2023.
Zooming out, it’s hard to appreciate that this is an improvement since the 2020-2022 low rate-fueled credit boom dwarfs it. However, the annual trend is in line with the healthy rate seen this time in 2019. Since larger balances are harder to grow and households added 44.3% (+$704.6 billion) to their mortgage balance from June 2019 to June 2025, some may argue it’s even better now.
Canadian household mortgage credit is performing similarly to existing home sales—it’s improving, but far from a volume considered normal. Accelerating mortgage debt is often viewed as a strong sign of growing market activity, but as mentioned last week—the recent increase is more likely due to investors getting the bill for their pre-construction shopping spree from 2020 to 2022, as they finally reach completion.
None of this is to dismiss the possibility of a near-term recovery, but at this point, drawing any deep market insights from the past 3 months is basically a dice roll.
Anecdotal evidence for those in the industry. More people are refinacing but doing an equity withdrawal for a downpayment, and “lending” it to their kids.
The kids are sometimes actual children, and really they’re doing it to pay for these investment properties they consider their kid’s asset to sell when they grow up or whatever.
It may not seem like a problem to regulators, or even brokers, but this risks amplifying narrow risk for their segment and compounding the downward pressure on leverage.
Point that you guys graciously made earlier—a good chunk of presales are being done by private financing for 6-12 months, often from the developer who’s borrowing on the institutional side and lending it so it appears off book.
The full picture of mortgage debt is being very much hidden. Just because you can’t see it, doesn’t mean it can’t impact you.
The big issue here is that monetary expansion (vs real gdp growth) has now been used for creating economic growth for 15y. The fits 5 was OK, insofar as it was a way to lessen the impact of the GFC on central Canada. However, since 2015, it has been used to maintain the image of growth while actual productive GDP, investment and productivity have collapsed. This is why real GDP per capita (or standard of living) is down more than 40%, why inflation has eaten up most of Canadians pay, and why there are no private expansion of investment outside of real estate.
As noted above, the other big indicators of this are the expansion of equity withdrawals from existing properties, and the massive growth of grey market mortgages (private money) which are unregulated. Even worse, these two are related since they see even more ‘private’ funds being funneled not into productive investment, but into massively over priced real estate.
I would agree with both commentators, that Canada now has a very unhealthy debt/investment market, that needs to be realigned. Residential real estate is a basic staple, not an investment vehicle that should deliver decades of double digit returns. When an investment in a house or condo is providing a better return than an investment in a business that generates actual economic output, like an oil company, mine, manufacturing or SaaS company, then we have a serious misalignment in the economy. Not only is this making Canada far far less competitive and productive, its causing runaway inflation.
Canada’s M3 continues to rise unsustainably, from less than $1Tr in 2005 to 3.93Tr today. As noted above, 2.3Tr of that is mainstream residential mortgages, which now represent 57% of all M3? This also means that the root cause of the inflation mess (and associated housing mess) is nothing other than the private bank money expansion used to fund housing price appreciation. Add to that, as noted above, that many developers are now using institutional and commercial lending to offer ‘private’ mortgages, and that number likely comes closer to 67-70%. This is not a functioning economy.
The single biggest concern is that the CHMC, misused by the Trudeau / Carney Liberals to now fund speculators, developers, banks, and so on, is also at an inflection point where a major market correction could easily add another 1-2 Trillion in national debt, since the CHMC has no substantial reserves for a 2009 or 1992 housing correction. This would have a major impact on govt and individuals, as it would create higher rates, more taxes, and less investment. It would likely see a massive bank bailout. Therefore, Carney will continue to increase leverage into housing to prop up values in key areas where his support lies, eastern, central and coastal BC, increasing the risks of a Greece style monetary meltdown.