Canada

Canadian Mortgage Debt Prints Slowest Growth For The Month Since 1983

Canadian mortgage debt printed a record high, but is still growing much slower than usual. Bank of Canada (BoC) numbers show the balance of mortgage debt printed a record high in March. The record debt came with the slowest pace of growth for March since 1983.

Canadian Mortgage Debt Now Over $1.55 Trillion

The balance of mortgage debt at Canadian institutional lenders reached a record high. The outstanding balance stood at $1.552 trillion in March, up 0.12% from the month before. This represents an increase of 3.2%, when compared to the same month last year. The annual pace of growth is the slowest for March in 36 years.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

Mortgage growth is behind falling behind last year, and is one of the slowest years on record. The annual pace of growth in March was 32.25% lower than it was last year – a notoriously slow year. Since 1990, the annual pace of growth has only been slower for two months – April and May of 2001. For those too young to remember 2001, the reversal didn’t come by itself. The BoC slashed interest rates nine times in 2001, and had started cuts before it fell to the level we’re seeing.

Canadian Mortgage Debt Is On Track A Near-Term Rise

A common method of forecasting where a growth trend is heading is to annualize a shorter period. The process of annualizing is measuring a few months, and projecting it as though it were the whole year. The annual trend can’t change directions without the shorter annualized trend doing it first. A cross of trend lines would be the first sign of a change in direction, but is not a definitive sign. The annualized period needs to stay above or below long enough to “drag” the annual trend towards it.

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.

The annualized pace of growth is significantly higher than the annual pace of growth. The 3 month annualized pace of growth reached 3.8%, 18.75% higher than the annual pace of growth. The rise implies a short-term bump may be ahead, if mortgage growth continues to outpace last year. While we may see a short-term bump, don’t confuse that with a boom.

The annual pace of mortgage growth has been on such a long streak of deceleration, a bounce is expected. For 23 months, annual growth hasn’t seen a single increase. This is actually one of the longest stretches of consistent deceleration ever seen. Typically a sharp or extended trend is followed by a reversal. The reversal won’t let us know whether it’s a short bounce or real change in direction until it happens. Most of the growth is likely being driven by increased sales demand in Montreal, and smaller cities like Ottawa.

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6 Comments

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  • David 3 weeks ago

    Borrowing rates are easing. Not expecting a huge rise in customers attracted by a few points dropping, but people always get close to maxing out their full budget.

  • Baggy McBaggerson 3 weeks ago

    Exhibit A, a dead cat bounce. What we expect here is a short bump in growth, followed by a continued drop. The name comes from the fact that anything will bounce when dropped from high up enough, even a dead cat.

    Also called a Baghdad Bounce in politics.

  • SUMSKILLZ 3 weeks ago

    Numbers I don’t want to ever see, 1981, 1982, 1983, 1984. Such dark days of my youth I would rather forget. Any reference to those years gives me the heebie jeebies.

    • EricN 3 weeks ago

      What happened to you during those years? Please share.

  • Adrian Kekec 3 weeks ago

    I am totally bearish on housing along with you guys on the site. But you need to use logarithmic scales in your articles. I know you often put percentage change as well but these are not intuitive. It’s difficult to draw any conclusions visually looking at data visually over longer periods of time when it’s not on a logarithmic scale. It’s borderline misleading. Good work on articles and research. Keep it up.

    • Ty 3 weeks ago

      In what world does someone need to see a log scale chart otherwise they’re deceived, but can’t understand a percent change chart?

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