Canadian Mortgage Growth Hits Highest Level Since 2018… After Revisions

Canadian real estate markets were busier than usual at the beginning of last month. This helped to push mortgage debt higher, even though the back half of the month was halted due to the pandemic. Bank of Canada (BoC) data shows outstanding mortgage credit reached a new high in February. The year-over-year growth is now the highest in two years… kind of.

Canadians Owe Over $1.63 Trillion In Mortgage Debt

Canadian mortgage debt pushed to a new record last month with substantial growth. The outstanding balance of mortgage credit reached $1.63 trillion, up 0.26% from a month before. This works out to an increase of 5.0%, when compared to the same month one year before. For year-over-year (YOY) growth, this is very large considering the size of this debt pile.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

Close followers of this data may have caught a tiny detail in there – wasn’t last month’s growth higher? January’s YOY growth was initially reported at 5.1%, but has now been revised lower. The revised January is now 4.9%, letting February’s 5.0% come in higher. Revisions are routine, and typically not worth noting – but this one changes the acceleration trend.

Unrevised, mortgage credit would have printed a deceleration datapoint into February. Revised, it’s now the highest growth since February 2018. Both numbers are still high rates, so there’s not a lot to read into it. Just a note analysts are going to want to consider in their revisions.

Momentum Could Push Mortgage Growth Higher

Even though March is coming in weak, we might still see annual growth move higher. The 3-month annualized growth reached 5.6% in February, about 43% higher than last year. Since YOY growth tends to follow the 3-month, we would need to see a pretty big drop in March for it to move lower. That is, next month we might see higher growth, even though COVID-19 halted the whole economy.

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.

Expect some data skews over the next few months, as the COVID-19 shock starts to appear. There was already irregularity due to the fact Q1 2019 was unusually slow. The expected impact before the pandemic was, we would have seen borrowing cool into the year anyway. There’s still one more month that is likely to show the market accelerating, but that’s due to momentum.

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  • Pete 4 years ago

    So no mortgages in March, and the data is going to rise? I still don’t get it. ELI5.

    • Trader Jim 4 years ago

      The period between last March and this February is going going to be big enough to push March higher. Makes more sense?

      In the BD research newsletter note last week, they also said OSFI banks also processed 213,000 mortgage deferral processed. This means those mortgages will accumulate interest, and not be paid down, also creating a net increase for the mortgage debt pile.

      This is textbook overhang.

  • carlton 4 years ago

    Any relevant stories?

    How are real estate markets doing? How is covid – 19 impacting them? E.G. Hong Kong (biggest housing bubble in the world) , Australia, etc

  • DB 4 years ago

    I don’t get it..RE here in Canada is a Ponzi scheme. The only difference is that the powers that be have known this for decades and because 60 % of the population has in some skin in the game it has become to big to fail..or else everyone loses. Like the corona virus, Canada is not immune to what happens when the the outside world takes their money and invest’s elsewhere. The Gov’t will use their mean’s to lure them back in order to save the scheme from collapsing in on itself. Every time they do they just kick the can down the road to the next generation, but this is a generation of have not’s and so I fear this is the straw that breaks the camel’s back. They will not have the capital to purchase over priced homes where the stress of taking on such a burden will take years off their life. 🙁

  • straw walker 4 years ago

    As a percent of GDP CDN personal debt is now higher than Greece.

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