Canada’s addiction to mortgage debt is strong, despite the housing slowdown. Statistics Canada (Stat Can) data shows the balance of outstanding mortgage credit hit a new record in December 2022. Mortgage credit growth has slowed to the lowest level in years, but remains unusually elevated compared to pre-2020. That remains a concern with a balance the size of Canada’s GDP, and growing significantly faster.
Canadians Owe Over $2 Trillion In Mortgage Debt
Canadian mortgage debt is still on the rise, adding billions at the end of last year. The outstanding balance rose 0.1% ($3.0 billion) to hit a total of $2.08 trillion in December. This represents a 7.1% ($137.8 billion) increase from last year. Just the sheer size of this debt should present concerns, concentrated amongst a third of a relatively small population. However, it’s beginning to moderate in growth.
Canadian Mortgage Borrowing Is Much Slower With Higher Rates
Slowing real estate sales and higher rates are putting a drag on mortgage credit. Annual growth peaked in February 2022, a month before the first hike to the overnight rate. Since then, we’ve seen deceleration every month up to the 7.1% reported in December. It’s now at the lowest growth rate since October 2020.
Canadian Mortgage Debt Hits A New Record High
The outstanding balance of Canadian residential mortgage credit owed to institutions.
Source: Bank of Canada; Better Dwelling.
Slower Isn’t Slow, and Mortgage Debt Still Outpaces Productivity
It’s important to remember that slowing isn’t slow. Outstanding mortgage credit is still accumulating at an unusually fast rate. The rate for this past December was still 1.4 points higher than the average in the 5 years prior to 2020. It’s also growing much faster than GDP, despite being roughly the equivalent size.
Canadian Mortgage Debt Growth
The annual growth rate of Canadian residential mortgage credit.
Source: Statistics Canada; Better Dwelling.
Canada’s mortgage addiction is slowly being reigned in by higher interest rates. However, mortgage credit growing faster than GDP is almost certain to lead to slower consumption. In short, the non-productive financial economy is killing the productive economy, and that’s bad news for long-term growth.