Canadian Mortgage Debt Growth Accelerates, But Throws A Sign It May Be Losing Steam

Canadian households are back to binge borrowing, and it is sending debt soaring. Bank of Canada (BoC) data shows mortgage debt at institutional lenders reached a new high in November. Not at all surprising, but the acceleration of annual growth is – which is now at the highest level in over a year. Although there’s at least one sign the acceleration may slow soon.

Canadian Mortgage Debt Tops $1.62 Trillion

The balance of mortgages debt reached a new all-time high, with some pretty decent growth. The balance at institutional lenders hit $1.62 trillion in November, up 0.37% from a month before. This represents an increase of 4.6%, when compared to the same month last year. Growth over the past few months has been picking up, and this is the highest printed in over a year.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

The 12-month rate of growth has been accelerating over the past few months. November’s 4.6% 12-month increase marks 8 consecutive months of acceleration. The rate is now at the highest level since April 2018, and it was the biggest November since 2017. Mortgage debt is back to seeing big growth, but there’s at least one sign it could peak over the next few months.

Annualized Growth Makes A Dip In November

The near-term trend is telling us growth acceleration may be slowing soon. The 3-month annualized pace of growth reached 5.7% in November, down 3.39% from the month before. This is only one decline, so it’s unclear if it’ll follow with further declines going forward. However, it does show that growth lost a little steam.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change, and 3 month annualized change, of outstanding Canadian mortgage credit at large institutional lenders.

Source: Bank of Canada, Better Dwelling.

Canadian households printed a new record high for mortgage debt, accelerating growth. An impressive feat, considering it becomes more difficult to accelerate on higher balances. The 3-month annualized trend indicates it could be losing a little steam. However, it’s only one decline for the indicator.

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  • Trader Jim 4 years ago

    Weak first half for sales, delayed until the latter half. Shouldn’t surprise anyone, but I get that the audience is going to be a little less technically inclined. The important takeaway observing people pressure themselves into a small window. Big squeeze, like cannabis stocks, and everything else.

    • Darren Schwartz 4 years ago

      The government should stop messing with the market.

      Markets correct themselves, and fix supply and demand on their own. Home prices would have been more stable had they *not* done B-20 Guidelines, and forced those buyers to delay until now. Now rather than just letting the market adjust to the current regulations, they’re going to make another adjustment and recycle this bubble/crash cycle they’re so heckbent on delivering.

      • Neo 4 years ago

        The market isn’t going to adjust themselves because interest rates are being unnaturally suppressed. So this B20 was a way to have higher interest rates without doing so for the entire housing market. The market will never adjust until interest rates rise for everybody. Unfortunately we are at teh point of no return where Central Banks are now forced to keep them low for other systemic reasons.

      • SH 4 years ago

        So you don’t want B20, which essentially acts to weed out subprime borrowers. In that case, how do you mitigate taxpayer risk? You do realize that taxpayers are backstopping this whole mess via the CMHC, right?

    • Omar 4 years ago

      Correct. All data has issues in processing that need expertise to filter for understanding. In the case of the 12 month growth chart, it’s distribution. Dan probably knows this, but the way most experts will individually think of this slow first half, delay to back half would look like this.

      Still growth, but not the story the headline people are thinking.

  • Virtual 4 years ago

    Is it residential mortgages only or commercial too (I know the article starts with “Canadian households …” but the rest reads as if it’s any and all institutional mortgages). If former is the case, it then would be interesting to see the first chart “The outstanding balance of Canadian mortgage credit” in comparison to an average house price and average family income (though regional price/income differences may skew the outcome).

    • Yen 4 years ago

      They’re residential mortgages to non-businesses, held by households. Commercial mortgages doubles the number, then non-institutional holders also bumps it up another 20% or so.

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