Canada might be in the middle of a pandemic with a shuttered economy, but it hasn’t slowed mortgage growth. Bank of Canada (BoC) data shows residential mortgage credit hit a new record high in December. The rate at which mortgage debt was the shocking part though.
Mortgage debt is now growing at the fastest pace since the Great Recession, prior to the slowdown. To put it in a less abstract way, mortgage debt grew by the equivalent of 6% of GDP, just over the past year. It’s a lot of mortgage debt, by any measure.
Canadians Owe $1.66 Trillion In Mortgage Debt
Canada’s outstanding residential mortgage credit reached a record high. The balance hit $1.66 trillion in December, up 0.62% ($10.2 billion) from a month before. This represents an increase of 7.67% ($118.17 billion) compared to the same month last year. The record isn’t just a record of the balance of mortgage debt though. It’s also a multi-year high for the rate of growth.
Canadian Residential Mortgage DebtThe outstanding dollar amount of residential mortgage credit held by Canada’s instituional lenders. Source: BOC, Better Dwelling.
Mortgage Debt Last Grew This Fast In 2010
The 12-month rate of growth for mortgage credit reached the highest level in a decade. The 7.67% 12-month growth in December marks the 22nd consecutive month of acceleration. This is the highest rate of growth since November 2010, almost a full decade ago. There’s one big difference though. Mortgage credit is growing at the same level as back then, but in 2010 it was decelerating. Now mortgage credit is accelerating into the recession.
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.
Mortgage Debt Increased By 6% of GDP
Part of the acceleration trend is due to the comparison period, but not all of it. Mortgage credit growth was unusually slow in 2019, so a slight boost in 2020 propelled it. Throw in stimulus in 2020, and it’s not unexpected to see it rise. That doesn’t means this growth should be downplayed though. The country has never before seen mortgage credit make a $118 billion increase in just 12-months.
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.
To put that number in context, it’s about the size of 6.11% of annual GDP. It’s an unheard of amount of mortgage credit for such a short time. Not just in Canada, but the mortgage credit borrowed in the past year is larger than the total GDP of 128 countries. To say it’s large feels like an understatement.
Canadian mortgage credit growth isn’t just hitting rapid numbers, it’s growing at a rate not seen in a long time. During the recession, it’s begun growing at a rate similar to a recovery – but the economy hasn’t recovered. Instead, when the pandemic hit, the economy leaned on real estate even further.
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