Canada

Canadian Mortgage Debt Grows At Fastest Pace Since 2010, Adding Over 6% of GDP

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 Debt

The 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 Change

The 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 Change

The 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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11 Comments

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  • Trader Jim 7 months ago

    I’m guessing a lot of people won’t know that expressing as a percent of GDP is for the context of size to the economy, not the percent of economy it creates.

    This percent wouldn’t even cover the portion of residential investment.

  • V 7 months ago

    So what does this mean? All the idiots overpaying for houses are going to lose their shirts once more and more people realize they overpayed and when interest rates go up can’t afford their house. Gee looks like this lending spree has made home prices unattainable for regular folks just trying to live.
    Houses aren’t worth what their selling for and people are basically making all these homebuilders rich. Good job Government.

    • Mike from Canmore 7 months ago

      It’s ok bro, Tiff Macklem says he’s keeping an eye on things, you know in case this gets bubbly and the money we’ve been printing doesn’t go to a productive use that will actually stimulate the economy.

    • Paul 7 months ago

      V

      Don’t you mean good job BOC?

  • straw walker 7 months ago

    Maybe it’s a sign that those that bought a secondary house on a Heloc loan, sold the house and payed off the Heloc loan. Then the the new home buyer took on a mortgage to buy the this same house.

    • Paul 7 months ago

      Straw walker,

      That is very possible. I went into a banker to ask for a small mortgage for a project (50k), he told me to use my line of credit and refused to see the difference interest rate wise between the two. When I asked him if he was suggesting I buy a house with a line of credit he quickly backtracked like our conversation was being recorded.

  • Jimmy 7 months ago

    I don’t know about you but the central bankers needing to repeat that there is no inflation makes me shrudder.

    Kinda like when a company says they are solvent…..

    Hopefully the central bank can keep currency and inflation stable while keeping rates low.

    Is this likely? Please tell me what I am missing.

    • John 7 months ago

      For whatever reason, they apparently don’t include housing costs when calculating inflation. Makes no sense to me, and this would be a much different picture over the last decade + if they did.

  • V 7 months ago

    Yes Paul, you’re correct the BOC!

  • Scott MacKinnon 7 months ago

    Wow, I’m reliving the 80’s! Or maybe it’s the 70’s. Same Prime Minister and we’re all ready for rates to soar! I remember a candy bar going from 10 cents to 25 in one summer. It’s deja vu all over again…

    • Gerry 7 months ago

      Us Baby Boomers that haven’t mentally blocked out those years and realize this is a game of negative interest rates, remember those days distinctly. This was right before they changed inflation measuring from using the monetary print to using their constructed basket where they can assume substitution if something gets too expensive.

      I see they tried to move the bar for inflation again, and moved the bar to lower inflation again. Swell system when the governments put in place by the people, try to hide reality from them.

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