Canadian mortgage growth is showing minor signs of life. Bank of Canada (BoC) numbers show outstanding mortgage credit reached a new record in May. The growth rate picked up from a month prior, but it was still the second slowest May in three decades.
Canadians Owe Over $1.56 Trillion In Mortgage Debt
Canadian mortgage debt reached a new all-time record high. The outstanding debt stood at $1.56 trillion in May, up 0.68% from the month before. The balance was also 3.64% higher than the same month last year. Outstanding mortgage credit printed a new record, but growth is still slow for the month.
Canadian Outstanding Mortgage Credit
The outstanding balance of Canadian mortgage credit.
Source: Bank of Canada, Better Dwelling.
The annual pace of growth is higher than the month before, but much lower than Canadians are used to for May. The 3.64% annual rate of growth in May is 22.2% lower than the growth seen this time last year. This is the slowest annual rate of growth for any May in at least 29 years, with the exception of 2001. That one exception saw interest rates cut multiple times to bring back growth.
Near Term Mortgage Growth Could Move Higher
Outstanding mortgage credit growth may rise in the near term. One common way of forecasting growth is annualizing a shorter period. Annualizing a trend tells us how the whole year would look if it was like the shorter period. That is, of course, if the annualized growth stays higher or lower than the 12 month rate of growth.
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.
Short-term annualized growth is substantially higher than even last year’s number. The 3-month annualized pace of growth reached 4.1% in May, up 17.14% from last year. That’s also how much higher it is than the 12 month rate of growth currently. Worth remembering spring is typically the biggest window for real estate sales. It’s going to be an uphill battle to keep the growth moving.
The growth rate of mortgage debt is once again on the rise, but is still unusually low for the month. There are a few signs mortgage growth may have bottomed, pending no external pressure. However, the traditional busy season for real estate sales has mostly passed. That could damper the current momentum.
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It’s unfortunate these numbers can’t be broken down by market. Would have been interesting to see how Toronto and Vancouver are doing, now that Montreal and Ottawa are the leaders in sales volume.
Why can’t the numbers be broken down by market?
The data just can’t be broken down, because it’s traded amongst lenders, etc. Equifax breaks down some of it quarterly, but it looks like it’s missing about $300 billion.
Ethan, percentage-wise, Ottawa and Montreal may be the leaders.
However, actual transactions-wise, Toronto had 9,899 in May 2019, while Ottawa had 2,423. Montreal had 5,303 in May 2018, so let’s just estimate that it was about 5,500 in May 2019.
Even with Montreal and Ottawa hitting above their belts for May 2019, their transactions numbers volumes are significantly fewer than Toronto’s monthly numbers on a less energetic May than Toronto is used to seeing.
The impact of the Toronto housing market on Canada’s national housing market is astounding.
I read mortgage growth numbers every month, and I feel like I’m not getting it. Why is this important to regular people?
Most “regular” people won’t need this kind of information. I read it because it’s mostly work related, but you might be able to gain some insights for your own portfolio.
I believe Better Dwelling is the one that explained this. Declining mortgage growth means less commissions, and services bought with houses. That makes GDP decline, and adds multiplier pressure to it. For example, if residential investment dropped by a percent, but nothing else made a big jump to replace it, Canada would be in a recession.
Now there’s two kinds of recessions. That ones you feel and the ones you don’t. The former are the ones where jobs disappear, immigration declines, wages drop, and distressed assets appear for a “reset.” These are healthy purges of the economy. They’re hard, but they’re important for long-term reallocation of efficiencies.
Then there’s the ones you don’t feel, which is what Canada prefers. For example, in 2009 the recession was barely felt outside of Alberta. People in the rest of the country went on with their lives, while the inefficiencies kept getting larger. They socialize the losses of big capital stake holders, by devaluing currency and giving people more debt to buy stakeholder assets.
It’ll be interesting to see how Canada handles this one, because the world is looking at Canada’s debt problem, and sees it out of control. Meanwhile the Bank of Canada is suppressing mortgage rates, to ensure people have cheap and easy access to credit.
Funny. You have the exact issue we have in Australia. Record immigration, but after hitting a peak prices are in free fall. Now the smaller cities are driving up prices in anticipation of this great migration that hasn’t happened, and won’t happen this cycle.
If you want a look into the future, look to Australia. The central bank will meddle in the mortgage market to make rates lower. It won’t work. Then they’ll cut rates, and banks will basically say no we can’t pass on the cut because it’s too risky.
https://www.kitco.com/news/2019-07-02/UPDATE-1-Australia-apos-s-top-lenders-decline-to-pass-on-cbank-rate-cut-in-full-to-customers.html
David, can you expand on the following portion of your comment:
“Now the smaller cities are driving up prices in anticipation of this great migration that hasn’t happened, and won’t happen this cycle.”
I am seeing that to the South, South-West, and East of Toronto, but I’m trying to comprehend it.
Any elaboration would be appreciated.
Suburban cities of the GTA- as Brampton, Markham and Pickering were planning to build extra campuses of the major universities, which means more “international students” arriving to “study” at these satellite campuses, which in turn:
1) Increase demand for housing
2) Increase speculation by money launderers
3) Allows the war criminal who murders children for their organs to buy farm land to develop for the sheeple to pay Manhattan prices.
MM respect your elders…we get it. you just got out of college and want to show us you are trying to fit into some big boy pants.. I’m assuming it’s college..mm mm maybe less from your poor use of expletives…OK less. Home schooled for sure..But if you do have some formal education in the field you babble on about at least show us your cred’s in the tone of your comment here. Just say’n. 😉
Pretty sure MM is from the mainland trying to protect his investments from tanking by convincing us “the market only goes up!”. You can tell because his google translate is always just a little bit off. It’s almost passable but always has a hint of Nigerian prince about it. Definitely not Canadian, just another mainlander trying to protect his money from the almighty Xi. So he probably does respect his own elders, just not our country’s or our country’s values.
While Vancouver has an inflow of money launderers washing their monies at the casino, Toronto is unique in a sense that international “students” bribe immigration lawyers and pay off Canadian employers to increase their work hours through fraud.
A few “students” in BC, but the majority of whom are in Toronto, would pay franchise owners to “work” as salaried employees, and we wonder why jobs are hard to find. The money launderers and foreign criminals are bribing everyone, including employers who are to provide jobs and salaries, not anymore. One has to pay the employer in Canada!
Toronto employers would refuse to hire a young person unless that applicant pays the employers a cash payment or work for nothing dollars.
It’s dire for the future generations. The Boomers are retiring with gold-plated pensions while also profiting from their plywood houses that they bought for pennies a few decades ago.
Joseph…Tiz the season outside the GTA home owner/realtors are expecting sellers nearing retirement etc to sell their homes in the city for bigger cheaper homes in rural Canada..Every year its the same old thing..Cyclical for sure.
@Nasir: Immigration isn’t declining in cities such as Toronto.
There were stories of immigrants and “students” from China and India paying employers to hire them to fraudulently boost work hours for permanent residency and citizenship.
As long as wealthy “students” are tossing stacks of Bordens on the table of lawyers and Canadian employers, the charade will continue, as in, a real estate bubble and paying over $1000 a month to rent a room and share a bathroom with several strangers inside a moldy basement.
whats scary is that Canada’s number one contributing industry to GDP is Real estate and rental and leasing. Not sure how sustainable this is. It does not really produce anything productive and its not making us more competitive. Its worse when you consider we are living in one of the largest countries in the world. Will be interesting to see how this plays out. Even Australia with its crazy prices has a smaller portion of RE contributing to GDP. People are essentially parking money here which is why income and prices are so detached. If that’s all this country has to offer then only time will tell how this plays out.
Just for comparison’s sake:
https://www.nytimes.com/2019/06/30/realestate/homes-that-sold-for-around-1-million.html?action=click&module=Well&pgtype=Homepage§ion=Real%20Estate
Even if you factor an exchange rate multiplier of 1.3 US to 1 Canadian, real estate seems very cheap in the States. And this is even in Manhattan which is known for uber-high white collar salaries and rents.
Only in Toronto would someone pay $1,100 to rent a room inside a room, inside a moldy, rat infested and flooded during sunny weather basement apartment located in the far end of Toronto.
Toronto world class city my athlete’s foot!
If Toronto was that world class why do famous entertainers like Justin Bieber, Drake and Celine Dion have to work in the USA to get where there are at today?
Even Russell Peters joked that if he was in Toronto, he would be delivering pizzas until he dies prematurely at age 55.
Manhattan | 3 bedrooms, 1½ baths
$1,130,000
315 East 77th Street, No. 3A, Upper East Side
C$1.4 million for a 3bedroom in MANHATTAN? (Rubbing my eyes). Manhattan is like the Yonge-Dundas of Toronto, only with more jobs and way higher white collar salaries.
A moldy and broken down house in the middle of Markham Ontario (north of 16th avenue) would sell for more than that. Distance-wise, Markham to Toronto is like the New Jersey of the NYC area, but only with less subway lines, transit and overcrowded hospitals like Brampton, where “students” from China and India lift stacks of Bordens and pay millz for a farm house or barnyard.
Again, replied to my post but didn’t actually reply to anything within my post. Dances around the subject mostly and goes off on a tangent about being biased against outsiders? Which if you haven’t had your head in the sand, every Canadian citizen should be against foreign buyers; that is unless you’re only looking after your own house value that you’ve now used as an ATM and retirement plan. Also MM doesn’t deny being a mainlander trying to hide his money from the CCP. You say the decoupling of housing prices and local incomes is justifiable because we don’t build enough supply? Of course we can’t build enough supply to satiate the mainland, there’s like A BILLION OF YOU GUYS.
Don’t worry, google translate will improve over time 😉 and then your posts might make some sense and you might even be able to understand the posts you reply to. But perhaps we’ve hit the gold mine with MM and he’s really a bot! Exciting times guys.