Canada

Canadian Mortgage Growth Picks Up, But Is Still The Slowest In Over 20 Years

Canadians are taking out mortgage debt, but at an unusually slow pace these days. Bank of Canada (BoC) data shows outstanding mortgage credit reached a new high in July. Mortgage growth is improving compared to previous months. However, this past July was still the slowest rate of growth for the month in over two decades.

Canadian Mortgage Debt Tops $1.58 Trillion

Canadian mortgage debt owed to institutional lenders reached a new record high. Outstanding residential mortgage credit topped $1.58 trillion in July, up 0.5% from a month before. This represents an increase of 3.8% compared to the same month last year. The new record for household mortgage debt is impressive, but the growth rate was not.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

The rate of growth for mortgage credit has improved over the past few months, but was still very slow. The 3.8% 12-month increase in July marks the fourth consecutive month of acceleration. However, the rate is still 2.6% lower than the same month last year. This past July was the slowest 12-month increase for the month since 1995. Home sale volumes are improving, but not enough to drive mortgage growth to normal levels.

Mortgage Growth Likely To Improve

The 3-month annualized trend indicates near-term growth is on the horizon. The 3-month annualized pace of growth reached 4.4% in July, up 63% from the same period last year. More important, this is 15.8% higher than the current 12-month growth. That’s a large buffer, giving a lot of room for growth. Over the next month or so, the 12-month rate of growth is likely to move higher.

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.

Not clear? Annualizing growth is one way analysts use to help forecast growth. They do this by taking a short period, 3-months in this case, and projecting it as though it were the whole year. By comparing this to the 12-month rate of growth, we can see if near-term performance is better or worse. If the 3-month is higher, the 12-month rate of growth is expected to rise. If it’s lower, it’s expected to fall. The annualized period just needs to stay above or below long enough to “drag” the trend. In this case, we’re likely to see near-term growth.

There’s been some short-term improvements in mortgage credit growth, but not a lot. Over the past few months we’ve seen the 12-month rate of growth rise, compared to previous months. However, the rate of growth for this past July was still the slowest for the month in 24 years.

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14 Comments

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  • Kathleen Thomson 3 months ago

    Mortgage growth at the lowest in years, but sales are rising? Hmmm…. 🤔

    • LT 3 months ago

      Maybe it’s because of the growth at credit unions?

      • Trader Jim 3 months ago

        Credit unions and all large lenders like NRFI are included in that number. Private lenders are the only ones not included I believe.

    • Boom 3 months ago

      Not sure how to piece this together, but I think another massive wave of laundered dollar landed with new condo sales in Q2 for GTA. Chart is remarkable per Urbanation if anyone is interested. The story just keeps on going and it gets even more confusing considering the lack of data transparency. You’ve got to assume the heard playing in YVR shifted to GTA due to downturn.

      Is it even possible to identify any other city at any other time in history that experienced this kind of condo expansion when looking at the past decade in GTA? please share..

    • Enough of this 3 months ago

      One thing is for sure, FINTRAC is clueless..

    • Aldi 3 months ago

      That just means people are paying less overall for the units purchased, This could be due to falling prices of the units i.e single detached homes or switching to a lower segment of the market i.e condos.Remember, while the overall benchmark price is down about 10% from the supercharged highs of early 2017, single-detached homes have fared much worse while condos have fared much better.

  • Quan 3 months ago

    If you think credit growth is slow now, wait until negative rates hit.

  • Drako 3 months ago

    How is money laundering going in the real estate markets of Toronto? They say that even the Bank Managers of RBC, BNS, TD, CIBC, BMO and even a few credit unions would sign themselves as nominees for Ontario # corporations and facilitate proceeds obtained from dubious means to buy a condo or house in Toronto.

    But in Canada, posting incorrect speech brings in an entire department of Toronto Police. What is your priorities government of Canada?

    • Igor Lonsoff 3 months ago

      Toronto real estate is a ripoff for those who have the money. Houses in Florida sell at 10% of the price of Toronto, and one can even get an entire palace in Florida for less than $1 million Canadian equivalent.

  • Rana 3 months ago

    Ground is is being ready for crashed housing landing

  • Enough of this 3 months ago

    I think another massive wave of laundered dollar landed with new condo sales in Q2 for GTA. Chart is remarkable per Urbanation if anyone is interested. The story just keeps on going and it gets even more confusing considering the lack of data transparency. You’ve got to assume the heard playing in YVR shifted to GTA due to downturn.

    Is it even possible to identify any other city at any other time in history that experienced this kind of condo expansion when looking at the past decade in GTA? please share..

  • questionguy 2 months ago

    so what was going on in GTA RE in 1995 for that slowdown?

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