Canada

Canadian Mortgage Debt Hits A New Record, $1.56 Trillion Outstanding

Slower Canadian real estate sales are putting a drag on mortgage credit growth. Bank of Canada (BoC) numbers show outstanding mortgage credit reached a new record high in April. The new record came with stalled growth, but there were some signs a small bump could be on the way.

Canadians Owe Over $1.56 Trillion In Mortgage Debt

The balance of mortgage debt at institutional lenders reached a new all-time high. The outstanding balance reached $1.56 trillion in April, up 0.17% from the month before. This represents an increase of 3.2% from last year. The balance reached a new record high, but the pace of growth is still looking very weak.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

The annual pace of growth stalled, but is much lower than Canadians are used to seeing. This is the third consecutive month the annual pace of growth printed 3.2%. Outside of this period, only two months have printed lower numbers in the past three decades. Compared to the same month last year, the annual pace of growth is down 31.91%. That’s an impressive decline, considering how slow mortgage borrowing was last year.

Look Forward To Minor Growth… At Best

Annualizing growth is one method used to forecast where a trend is heading. Analysts do this by measuring a short period, and projecting it as though it were the whole year. Since the 12 month trend can’t grow without larger near-term numbers, it’s helpful to watch them for signs of growth. The shorter annualized period needs to be larger long enough to “drag” the 12 month growth higher.

Annualizing two recent periods, we get mild growth tapering towards flat growth. The 3 month annualized pace of growth fell to 3.5% in April, 10% lower than the same period last year. That would mean small growth may be coming, but the more recent one month annualized pace fell back to 3.2% in April. Unless it bounces higher the following month, we could see it stay flat or even fall soon.

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.

Canadians are pushing new record highs for mortgage debt, but the pace of growth is tapering. Any growth is better than none, but numbers this low is something Canada doesn’t have a lot of experience with. Other than this recent period, this generation has only seen growth this low for two months. After which, the BoC cut rates to stimulate growth. Of course, that was back when debt levels weren’t the highest of the advanced economies.

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30 Comments

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  • Your Bank 2 weeks ago

    Just think of all those interest payments. 😍

    • Trader Jim 2 weeks ago

      should be everyone’s hint that banks are slashing interest because they’re assuming they’ll get the same out of you at a low interest today at high value, or a lower price with higher interest later.

      Keep in mind, they’re cutting rates without fund rates declining. They’re willing to take a hit on margins to get you in now, which should make you a little suspicious.

  • Trevor 2 weeks ago

    People think of it as leverage, but that’s $1.56 trillion in future income already spoken for, then add interest. Even at this very low rate of interest, we’ve borrowed almost two years of GDP.

    • Trader Jim 2 weeks ago

      Add at least 2 to that for a GDP multiplier. We’ve borrowed at least 4 years of GDP going forward. Somethings gotta give, and if it’s not home prices, it’ll be your purchasing power.

      • MH 2 weeks ago

        If people think that employers will race to raise salaries to compensate workers for the eroding purchasing power so they can prop the RE prices, they are up for a big surprise. It does not work this way, especially in the recessionary environment.

      • John 2 weeks ago

        I gotta detract from RE for a moment… There is a constant noise from older generations that Millennial’s only care about instant gratification.

        But do these numbers not prove your age has nothing to do with it? Debt is the pinnacle of instant gratification: to be able to have something now at the future yous’ expense.

        The decisions that have led us to today and the resulting debt growth were not made by Millennial’s, and the explosive debt growth began long before most Millennial’s had their first job. If anything, the Millennial generation has be sold out by older generations and raised to believe this is normal and okay.

        So back to RE… With an entire generation believing 25+ year mortgages are something you should want and strive for… is there REALLY a reason to think the party will come to an end on reasoning? I believe the only thing that will kill the RE market at this point is widespread job loss, or directly targeted regulation.

        • Frost 2 weeks ago

          No amount of regulation is going to curb the money laundering done through RE. Most salary jobs in the GTA can not sustain a mortgage so those will not have any widespread impact on prices. The only thing that can curb the prices is for the feds to get serious about foreign and domestic money washing.

          • John 2 weeks ago

            I disagree insofar as, ‘No amount of regulation.’

            -B-20 increasing from 2% to 4% would put downward pressure on prices.
            -Lending standards to reduce LTV ratios would put downward pressure on prices.
            -Lending standards to reduce Loan to Income ratios would put downward pressure on prices.

            Basically what I am saying is, people are going to borrow every dollar they are told they are allowed to borrow because they believe, ‘that is how it is done.’ Not because of FOMO, not because it makes sense, but because ‘that is how it is done.’

            You can’t effectively launder money if it’s only your money going in and coming out. So until we stop lending large volumes of money to the vulnerable and uneducated I don’t think we are going to see a regression to the mean.

          • george 2 weeks ago

            re Frost: “You can’t effectively launder money if it’s only your money going in and coming out”

            Have you read any of these articles????
            https://betterdwelling.com/canada-would-be-in-a-recession-without-money-laundering/
            https://betterdwelling.com/money-laundering-provided-1-in-20-dollars-for-bc-real-estate/
            https://betterdwelling.com/how-a-little-money-laundering-can-have-a-big-impact-on-real-estate-prices/

            You know very well what John meant….don’t play ignorant. There are other channels to launder $$$ and Canada loves and allows this since it is NOT regulated via private lenders….nobody knows the source of the funds. Until this is controlled by the ‘blind’ FINTRAC and others, this is still happening today and affects RE.

          • george 2 weeks ago

            I meant my reply to John and not Frost. sorry about this.

  • Jupiter 2 weeks ago

    Every do realize with these Jacked up prices we are just doing a massive wealth transfer from productive young people to non productive old boomers right? You need money to make money, so draining our young people and giving it to boomers is the dumbest thing a country can do to itself. Time to leave Canada.

  • SUMSKILLZ 2 weeks ago

    I was at the jewelry store getting a piece fixed…there was a line up of folks wanting to sell their gold. I guess they are maxed out on credit, but still want an airplane vacation? Its been at least ten years since I saw a lineup of sellers…

  • FOMO 2 weeks ago

    Went to an Open House last weekend in Central Toronto

    LP $899k

    Sold $1.175M – yes was underpriced, probably was worth $1.1M but still

    With 9 offers.

    FOMO

    • AJ 2 weeks ago

      Wonder where these people are getting their financing? Do we have a lot of wealthy immigrants sitting on a lot of cash or do we have a lot of educated immigrants earning high salaries ( the Trump effect of scaring away techies to canada has certainly helped in maintaining the inflated prices). Am not sure if resident Canadians can afford million dollar houses unless funded by parents HELOCs

      • Frost 2 weeks ago

        Trump scarring techies to leave Silicone Valley? Yes I am sure lots of people are going to give up their $200K+ USD salary and come to Toronto for $75K in CAD because they hate POTUS so much. Yeah sure bud, you keep telling that to your self. Toronto has very little tech industry and its highly under paid. My friend developing medical AI is about to bounce to the States, could not refuse the double salary offer + medical benefits + warmer climate. Sorry but the talent is leaving Toronto.

      • Joseph 2 weeks ago

        Trump effect?!?

        The way I see it, Trump simply hires from within, not from other countries. Where the US has made it tougher for foreign nationals to go in and pick up jobs, Canada has picked up the slack.

        Ya, I guess that could be a Trump Effect. But I’m fairly certain that the US has enough skilled workers within its borders. Canada, by the looks of their immigration policy, is implying that it doesn’t.

        Either way, in connection to the housing market, I think recently immigrated skilled workers working at skilled jobs might be detrimental to keeping the housing market prices up. I only say this because to me, a recently immigrated person does not know their rights yet. They are happy to simply have gotten into the country. Therefore, the employer might try to take advantage and pay less. Less wages = less money towards a house.

        • AJ 2 weeks ago

          I know at least 10 techies who have come to Canada because of trumps immigration policies. They have worked in the US for a few years, saved up 150-250k CAD ( now the fx rate effect comes into play). They are completely blind to the economic situation and for them these prices seem normal. These dual income families get decent tech jobs with total HH income around 120- 160k and they leverage themselves to the max on mortgages due to the super high rents nowadays. This is absolutely happening in the GTA and I have friends who have done this

      • rustinpeace 2 weeks ago

        seems like a mix a lot of it is the international money laundering crowd. If you see a modest condo selling for like $1.5M its probably safe to say its international money. The second are people who got in before 2015. A lot of condo owners have a boat load of equity built up on fairly cheap condos. Bought for 300k selling for 800-900k and then upsizing which is creating a domino effect. The starter condo market needs to fall. Far to overpriced now and people with a lot of equity

      • vicky 2 weeks ago

        just pay 1 or 2 % under table to mortgage agent and you get what ever amount of mortgage
        this is setting between mortgage agent and all bank’s underwriter

    • Buy Buy Buy 2 weeks ago

      Went to an open house. Ask price $100k, sold price three trillion dollars. All cash. No need to back this up with any facts, just buy.

  • Cat 2 weeks ago

    What do you think happens when people are maxed out with dept and unable to spend.wide spread job loss just like 1990.

  • MM 2 weeks ago

    Hey boyz, check this out.

    https://www.narcity.com/news/ca/on/toronto/torontos-population-is-growing-faster-than-anywhere-else-in-north-america

    According to a new study published just this week from Ryerson University’s Centre for Urban Research and Land Development, Toronto is the fastest-growing city in both Canada and the United States.

    Based on the findings of researchers Frank Clayton and Eva Shi, Toronto’s population increased by 77,000 net new residents in the year ending in July 2018, a significant increase compared to all other North American cities.

    Toronto’s population grew over three times more than the second fastest-growing city in North America, Phoenix, Arizona. The researchers who conducted the analysis described Toronto’s growth rate as “stunning.”

    • Ethan Wu 2 weeks ago

      Yes, but there’s a few problems with the way Canada measures population, most people just don’t realize it. If the population of the GTA was outpacing the number of homes being built, they household size would be going up. Except it’s not, it’s going down.

      If Canada was pumping accurate statistics about where people are landing, this means people who can afford to buy a house are just standing on the streets, waiting for their condos to finish.

      One takeaway that’ll come from this is how very wrong Canada’s national statistics agencies are at tracking population density. We don’t even have the man power to estimate the same number of CPI points as the US (we measure about 60% of their services), but we can measure where people are moving using a distribution survey model? lulz

    • John 2 weeks ago

      Normally I wouldn’t comment to you, but you’ve cleaned up your grammar and approach, so here goes.

      https://www.ryerson.ca/cur/Blog/blogentry35/

      In terms of the metropolitan area, Toronto is a close second in growth. This number is significantly more important because it relates more to the economy of the region as opposed to where the city borders are and the new construction/redevelopment land is.

      However, the report is clear to point out international migration is the dominant source of population increase (82%).

      The important takeaway for me is that if we lower immigration, or Canada loses it’s desirability by foreign nationals, Toronto will very abruptly NOT be near the top of the list.

    • vnm 2 weeks ago

      Almost as stunning as, surprise, surprise, the chart-topping housing bubble.
      Bubble people attracted to bubble opportunities.
      Increasingly Torontonians are living on future earnings in a bubble-dependent
      job market.
      What a mess.

    • Mtl_matt 2 weeks ago

      Hey bud, check this out : https://www.huffingtonpost.ca/entry/toronto-population-growth_ca_5cf28f26e4b0e346ce7eef73

      Montreal is 6th on that list and a 4/2 within a 30 minute commute to downtown can still be had for 325k. Toronto is way out of whack on pricing compared to every city in the top 12, most of which have better weather and lower taxes (which of course doesn’t apply to Montreal). Inflation is the only way these crazy prices ever make sense.

      • tty 2 weeks ago

        Montreal is also becoming a more attractive place for tech talent as well. Who wants to live in an overpriced city, if your job is mostly remote?

  • Screwed Canadian Millenial 2 weeks ago

    …and the same boomers are going to vote for Andrew Scheer and promote anti-immigrant, xenophobic, populist and racist policies.

    They are hypocrites. The real estate bubble was fueled by low interest rates, foreign capital and though Garth Turner might disagree with me, artificial demand from mass immigration.

    If 200,000 newcomers weren’t arriving to Vancouver and Toronto ever year, would that furnace room located in moldy basement rent for $1,000 a month?

    Here in Toronto, six to eight families rent a basement of a home. When the Baby Boomer bought their house back in the 80s, the basement only had one main room or an extra lounge area. But these greedy Boomers use the laundry room as a room, the furnace room as a room, and even partition the lounge area for a room, and even use a closet as a room.

    The rent is too high!

  • Vicky 2 weeks ago

    I have experience that in ontario you pay 1 or 2 % cash to mortgage agent and get approved mortgage from big 5 banks. As well as per mortgage agent told me that all bank’s underwriters get cash money from mortgage agent like all underwriters have setting with mortgage agent for approve mortgage. This big corruption running in our system. Thanks to libral party and thanks to trudo

  • Snow Washing 2 weeks ago

    I usually don’t comment here but you blaming the Liberals is laughable. Corruption has no ideology. People with power and money don’t give a flying f who is running the government….

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