Canadian Mortgage Debt Passes 80% of GDP For The First Time

Canadians love mortgage debt, and most households consider it low risk. However, they might love it a little too much. Mortgage debt has seen astronomical growth over the past couple of decades. This is often attributed to large economic growth, however the mortgage debt to GDP ratio shows that might be a fib. Canadian mortgage debt has been growing at nearly twice the pace of GDP, and now has grown to over 80% of the size.

Why Is This Number Important?

Debt is future income used today. As debt loads get higher, more future spending is pulled forward. The higher these debt loads get, the more future growth is being used. Lower interest rates may have spurred this borrowing binge, by lowering service costs. However, as people get used to low rates (or depend on them), the stimulus effect is gone. Eventually, you’re just left with households increasingly vulnerable to shock.

GDP is the aggregate of spending and income of businesses and households. When we compare the two, we can see how much a country has been depending on debt driven growth. Economists generally believe a higher ratio means greater vulnerability to shock. At best, higher ratios tend to mean much slower growth, as heavily indebted households can no longer borrow to stimulate the economy. This typically results in a period of prolonged economic stagnation.

Now, that’s total household debt – we’re just looking at mortgage debt today. Why? Because in Canada, this number has grown so fast and large, it now rivals total household debt in other heavily indebted countries. Just this number brings up a lot of questions as to how much of a drag on the economy we will experience later on.

Canadian Mortgage Debt To GDP Is Now Over 84%

The ratio of mortgage debt to GPD reached an astronomical level in the most recent quarter. The size of mortgage debt is now equivalent to 84.28% of GDP in Q2 2020, up from 69.13% last year. Ten years ago, this number was just 59.02% of GDP. That means during that period, mortgage debt grew over 40% faster than GDP. Part of the recent spike has to do with the recession, but not all of it. 

Canadian Mortgage Debt To GDP

The ratio of Canadian mortgage debt, compared to gross domestic product.

Source: BoC, Stat Can, Better Dwelling.

Mortgage Growth Grew 2x As Fast As GDP Over The Past 20 Years

Even if we dismiss the recent bump in ratio as temporary due to the pandemic’s impact, we still see astronomical growth. Before the pandemic in Q1 2020, mortgage debt had reached 72.64% of GDP. Considering this ratio was just 39.62% in 2000, that’s a huge increase. Especially if the economy doesn’t just bounce back to pre-pandemic levels of activity soon.

Mortgage debt in Canada is growing much faster than the country’s economy. Over the past 20 years, it’s grown at double the pace of GDP. This indicates a huge dependence on debt-driven growth, which has never historically ended well.

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  • Yvette 4 years ago

    Finally. The correct way to look at this. No investors (especially if they already own a house), really cares if prices rise or fall. It’s about allocation of money.

    In this situation, the liabilities against future economic growth is stacking up. This makes people look to other countries like the US for longer-run growth, instead of speculating on housing markets.

    • Jason Chau 4 years ago

      Could be why even Canada’s pensions are now investing abroad. lol

  • Trader Jim 4 years ago

    One thing I find interesting (and I don’t think the data exists, just inference), is disposable income and debt.

    Young people typically drive disposable income trends, like restaurants, clothing, etc.. They also have the smallest incomes, and spend the highest percentage of income on housing now. Older demographics essentially scooped the disposable income trend, but don’t actually spend it going out.

    That’s why the trend of shuttering restaurants started way before the pandemic, same with clothing stores. Essentially killing the economy, since young people work to live in their space, and hang on to housing speculation as their only potential future security.

  • Mtl_matt 4 years ago

    That chart looks sustainable.

  • R 4 years ago

    What’s causing this Debt/gdp increase? Is it shrinking gdp or increasing debt ?

  • Ali 4 years ago

    Hi there!
    GDP dropped due to COVID; see below.
    How did mortgages debt change in 2020?
    A great analysis would include GDP growth in an individual chart, mortgage debt change in 2020 in another chart, and ultimately the comparison.

    • Ethan Wu 4 years ago

      Did you miss the part where they mention Q2 was due to the pandemic, but if you look at Q1 the same issue is seen?

      If you look at prior historic levels, GDP also dropped during recessions as well, but debt continues to grow at the same or faster pace, leading to those horizontal lines.

  • Dandy 4 years ago

    This is shocking!

  • Fight Back 4 years ago

    Time to implement speculator tax before this real estate crisis destroy us. Anyone or corp owning more than 2 residential real estate should taxed at 5% property value each year. We need to ban foreign ownership and hoarding.

    • Trevor 4 years ago

      Way too late for any of that lol. I know two small landlords both make under 60k a year from their day job both own three single family homes they rent out at just breakeven to the mortgage. Their both in their late 50s, laid off since covid started, and each have tenants not paying rent, already burned through all their savings staying current on mortgages. One is in guelph the other in kitchener, Ontario if you’re not familiar. Both of them are planning on liquidation but don’t know what to do about the tenants because they can’t evict

      • Paul 4 years ago


        Why don’t they sell ASAP?

        • Sam 4 years ago

          I sold a rental in April…..on condition of it being empty.

          I paid the tenants $3000 each apartment (it was a duplex) to leave. I also had to kindly and legally put pressure on them and actually assisted one to move.

          It sucks but you have to factor that type of thing into your investment.

  • Pony 4 years ago

    “Part of the recent spike has to do with the recession, but not all of it.”

    This conclusion is not helpful. Why don’t you also provide a trending line for GDP growth rate? Your article from Sept 28 literally shows linear mortgage outstanding credit growth for the last 15 years.

    • Jason Chau 4 years ago

      There’s a difference between not helpful, and not helpful to you. I found it immensely helpful.

      The author goes on to explain the first quarter was not subject to the pandemic’s influence, but was still substantial. The increase over time is the important part.

      Recessions happen, and that chart tells you after each recession, debt grows at a consistent level with GDP until the next 3-5 year boom in a decade.

  • straw walker 4 years ago

    US household debt v.s. GDP almost reached 100% in 2008.. as they were involved in wall streets latest scam..the sub prime mortgage scam.
    but since then that has dropped steadily to around 75%..
    N.B. that is different to just house hold mortgage debt.
    Many had to learn their debt lesson in the US…which has not translated into CDN.

  • DownToFinance 4 years ago

    “Interest rates are low, so it’s fine”

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