Canada

Canadian Mortgage Debt Sees Fastest Growth Since 2008, Balance Hits 89% of GDP

A few months ago, central banks were worried Canadians wouldn’t borrow debt. Now Canadians are borrowing at one of the fastest rates in history, and have an astronomical pile of it. Bank of Canada (BoC) data shows outstanding mortgage credit reached a record high in July. There are some signs mortgage credit is slowing, but it still has enough juice to drive growth for a few months. Households accumulated so much mortgage debt, the balance is nearly the size of 90% of Canada’s GDP.

Canadian Mortgage Debt Reached Nearly 90% of GDP

Canadian mortgage debt soared to a new record high, at one of the fastest rates ever. The balance reached $1.75 trillion in July, up 0.9% ($16.2 billion) from a month before. When compared to a year before, this represents an increase of 9.6% ($153.1 billion). At this balance, mortgage debt is about 88.63% the size of gross domestic product (GDP). It’s an absolutely mind-blowing number, to say the least. 

Canadian Residential Mortgage Debt

The outstanding balance of Canadian residential mortgage debt held by institutions.

Source: BoC; Better Dwelling.

Mortgage Debt Is Growing At The Fastest Rate Since 2008

Annual growth is moving at a breakneck speed and hasn’t moved this fast in over a decade. We haven’t seen the annual rate of growth hit such a large number since September 2008. Back then, home values were just a fraction of today’s size. Such a large growth rate at this balance is highly unusual.

Canadian Residential Mortgage Debt

The 12-month change in the outstanding balance of Canadian residential mortgage debt held by institutions.

<em>Source: BoC; Better Dwelling.</em>

YTD Mortgage Debt Jumped Nearly 3x More Than Pre-Pandemic Levels

The sheer dollar amount prices have gained is mindblowing. Year-to-date (YTD) mortgage debt increased $97.3 billion, about 83.8% larger than last year. A major accomplishment, considering last year was 53.9% bigger than the year before that. Households added mortgage debt at nearly 3x the growth pre-pandemic. It’s a low rate environment so debt is expected to expand rapidly. Relative to the size of the Canadian economy, this is a very large amount of mortgage debt for just a year though.

Canadian Residential Mortgage Debt YTD

The net-flow of mortgage credit year-to-date in July, compared to prior years.

Source: BoC; Better Dwelling.

Peak Growth Is Likely Very Close, But Expect A Few Higher Prints

There are some signs the rate of growth is beginning to reach a peak, such as the monthly and 3-month growth rates. Monthly growth came in at 0.9% in June, down from the 1.4% reported a month before. The 3-month annualized rate of growth fell to 13.6%, down from 14.2% over the same period as well. A look at the latter shows there’s still room for the annual rate to rise, but it’s approaching a peak. 

Mission accomplished for low interest rates luring consumers into borrowing credit. Households are now borrowing mortgage debt at one of the fastest rates in history. It produced some cheap economic growth, but they have nearly the GDP in mortgage debt. This will almost certainly be a throttle on natural economic growth going forward.

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5 Comments

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  • Olivia 4 weeks ago

    Only 3 more years at this rate to see it completely eclipse. Good job, Bank of Canada.

  • Cto 4 weeks ago

    You know, for a long time I believed that the BOC actually was trying to stimulate the real economy with genuine actions, but, I just can’t believe that anymore. …
    This no longer can be a matter of the incompetent, blindly lowering interest rates as a reactive measure.
    I believe that they are intentionally trying to blow this buble for financial benefits. Since when did a Central Bank chief actually have to have integrity….?

    • D 4 weeks ago

      It’s just another racket. Central banker gangsters or banksters make al Capone green with envy. Al Capone was a little ol chump compared to the evil and fabulously wealthy gangsters in government and banks.

  • D 4 weeks ago

    Are people okay with being a debt donkey or do they think that when the dollar collapses they’ll get their home even-stevens???

    Just google this, canada commercial banks total deposits, the figure includes all cheuqings, savings, money market, gics etc…in any commercial bank or bank branch operating in Canada. It’s about $4 trillion usd or as of right now $5.120trillion cad. Add $130 billion cad in circulating “paper” and coin money which you can find by looking at bank of Canada annual/quarterly reports for paper money circulation figures and tallying up all the value of coins ever minted on various websites.

    $5.25 trillion cad / 40 million people = $131,250

    That’s the average. If you don’t personally have $131,250 in bank deposits and/or physical currency then you are below average. Most Canadians are below average, the averages are skewed obviously but it goes to show you that nobody can afford anything decent around here. It’s designed this way on purpose.

  • Michael 4 weeks ago

    No doubt this is done on purpose – the government forces people to compete in this race by lending cheap money and bringing in 400k new immigrants a year while keeping housing supply growth low. Now we have to pay for the same house at least double from that 10 years ago. And they have guts to say “Canadians are accumulating too much debt”.

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