Canadian Mortgage Growth Plummets To The Lowest Levels Since 2001

Slowing Canadian real estate sales are hitting mortgage credit growth. Bank of Canada (BoC) numbers show June’s mortgage credit numbers grew close to half as much as last year. Even worse, the slow credit growth is on track to head even lower. Canadians are now in the worst mortgage market for growth in nearly two decades.

Canadians Hit A New Mortgage Debt Record In June

The balance of outstanding mortgages hit a new record high. Canadians owe $1.515 trillion worth of mortgages in June, up $5.06 billion from the month before. That sounds like a lot, but it’s almost half the dollar volume increase from last year. Last year being lower than the year before that as well. Mortgage debt hit a new high, but the market is experiencing a dramatic slowdown.

Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

Canada Hits The Slowest Mortgage Growth Since 2001

The growth of the debt pile is rapidly decelerating. The annual rate of change fell to 4.1%, the lowest it has been since May 2001. In 2001, the Canadian economy faced a huge slowdown, forcing the BoC to cut rates by 100 bps to prevent a recession. Since we’re discussing hiking rates, not cutting them, this should continue on trend. The trend appears to be heading lower, according to near-term data.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change, and 3 month annualized change, of outstanding mortgage credit.

Source: Bank of Canada, Better Dwelling.

Annualizing recent mortgage growth, it looks like the market will see further slowing. The 3 month annualized growth fell to 2.8%. A bit of a concern, since it includes some of the busiest months of the year for real estate sales. Previously when the trend was this low, it bounced higher due to spring or monetary stimulus. Neither are in the cards right now, with the government saying that rates will “normalize” soon. Normalize is code for continuing to rise.

The slowdown of mortgage growth is due to a slowdown in sales, which is being blamed on stress tests. If only it were so simple, but the slowdown is much larger than the stress tests. Higher interest rates, and peak growth of home sales are more likely behind the slow growth. That or the mortgage stress test is so effective, it’s hitting the rest of the world’s markets as well.

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  • Yuri 6 years ago

    But I saw a Toronto Realtor on CityTV say that the market is going to recover in the second half. People are going to be rushing to buy homes in the winter apparently. 🤣🤣🤣

    • Mica 6 years ago

      Everyone knows CityTV is where the big money gets their info from. lol.

    • RE Analyst 6 years ago

      Yeah, “rushing.” We’re running out of dumb buyers that think a 30% rise in prices won’t be corrected. There’s never in the history of any real estate market, been a rise that fast, that wasn’t followed by a correction.

    • bob 6 years ago


      I’m not an expert, however when I look at the performance of real estate sales and average home increases in the past at leas for toronto, it seems the market has a history people buying more from march-june range. I also had a real estate agent tell me the same thing that Winter usually things pick up… I was very confused by that statement because it seems there is less activity during the Winter.

      • Paul 6 years ago

        Traditionally the Real Estate annual market cycle starts in February/March and starts to drop off Sept and October and than slows to a trickle November through January. Over the last couple of years during the craziness there really wasn’t a pronounced cycle. In fact December 2017 was one of my busiest months ever.

        At this point it’s my opinion that it’s just too hard to predict where the market will be 3mos, 6mos, or even 9mos from now. The stress test has got a strangle hold on any property listed at $1,000,000 or more, increasing interest rates obviously have a slowing effect, and finally all the uncertainty related to Trump, NAFTA and Trade Wars have people a little hesitant to make a move. If you are currently in the auto or steel industries and were thinking of upgrading I’m pretty sure that all bets are off right now (at least for the most part)

  • Trader Jim 6 years ago

    Asset pricing 101, volume precedes a correction. Decline in mortgage dollar volume means the market is having trouble finding debtors. That’s going to cause rates to rise, which is going to throttle buying even further. Eventually buying stimulus can no longer come from the government, and has to come from sellers.

    • Justin Thyme 6 years ago

      Mortgage volume is decreasing so they are going to RAISE their prices?

      You mean like house sales are decreasing so sellers are going to ask for more?

      • Grizzly Gus 6 years ago

        It means sellers are going to have to ask for less until a price point is reached that is supportive of demand (access to credit).

        • Justin Thyme 6 years ago

          Directly from Trader Jim ‘That’s going to cause rates to rise, ‘ You appear to be only half-reading the posts lately before you comment..

          • Bernie 6 years ago

            I believe Jim means interest rates. The banks have to make money somehow, so they could increase their mortgage interest rates. They seem to be below BOC prime now. I could be misunderstanding though.

          • Grizzly Gus 6 years ago

            No you just don’t understand. His point is clear and makes total sense. Rising rates and prices have an inverse relationship. Many reasons rates (prime and or mortgage) can go up

          • Justin Thyme 6 years ago

            I believe the point was, mortgage volume is decreasing, so banks are going to raise their interest rates to recoup business.

            I would have thought that, when mortgage volume decreases, there would be a price war among the banks, lowering their interest rates to gain market share.

            Raising rates to gain market share just doesn’t make sense.

          • Grizzly Gus 6 years ago

            I thought your original point was that Jim was saying that lower mortage volume with higher rates would equate to sellers raising their prices. Makes a bit more sense but you are still wrong.
            Banks aren’t seeing a reduction in new loans because of competition with each other, it’s because of B20 and a changing credit cycle. How can a bank make more money when they are having trouble issuing new loans? Charge more for all existing loans.
            Like fishing. Cast a wide net. Tighten and reel those suckers in. Just don’t capsize the boat

  • Justin Thyme 6 years ago

    Take a close look at the last graph.

    From 1990 to 2001, looks almost identical to the graph from 2008 until now.

    But look what happened just after the lows of 2001 – the graph went almost straight up. If history repeats itself, the we are destined for a huge uptick in mortgage debt.

    Unless, of course, it doesn’t.

    • Sam 6 years ago

      Well, they slashed the rates from 5.75% to 2% in the span of 1year back then… Good luck with that!

      • Matt 6 years ago

        To add on as well, in 2001 the Canada Mortgage Bond program started, essentially overhauling the NHA Mortgage Backed Security program.

        • Justin Thyme 6 years ago

          So, then, maybe it doesn’t.

          My point is that economic event reversals only happen at the intersection of two graphs. Trying to make a prediction based on only one graph is futile.

          Demand will pick up, or it won’t, but it will take more than one graph to indicate what will happen..

          • carlton 6 years ago

            Why use a graph Justin ? just use your brain!

            1. Interest rates have risen, eroding purchasing power

            2. home appraisals are less than the previous year. (bank lends less)

            3. Stress test is in effect (less people qualify)

            4. Home sales have fallen off a cliff

            5. Inventory is on the rise

            6. Canadians have the highest debt levels amongst the G7 countries.

            Do you really need a graph to figure out where we are headed? What happened the last time home sales stopped and cheap money stopped?

            If you own a store and nothing is selling, where would you think your store is headed?
            Its ok to use a little common sense ever so often and not a graph.

          • Justin Thyme 6 years ago

            Actually, if you want to do more than just pissing in the wind, you DO need multiple graphs.

            There is absolutely no mathematical or logical reason to come to the conclusion you did from random facts. They have to be brought together into some comprehensive schema.

            That is why people have been predicting a bubble burst for SEVEN YEARS, based on random facts. Bubbles just don’t burst because someone thinks they will. They burst because everything comes to a cusp. Where that cusp is, no one can tell without looking at all of the graphs.

          • carlton 6 years ago

            Justin your lacking common sense, what does any of these have to do with real estate? think more type less…

            1. the climate is warming. wtf?
            2. we are running out of oil. wtf?
            3. the oil sands are expensive to develop. wtf?
            4. we don’t have enough shipping capacity for oil. wtf?
            Therefore house prices are going to tank. wtf?
            Random facts do not a position support.

            I don’t believe any of my points listed were random, please read again.

            Here is something simple not even common sense required.

            Homes aren’t selling, inventory is piling up, is the housing market headed up or down Justin? hint…… its not up

  • Glynis Van Steen 6 years ago

    thank you CMHC for your stress testing and thank you BoC for raising interest rates in doing your part to destroy the residential housing market and all related industry sectors in Canada. When these folks start their tinkering, don’t they even think about demographics? What were the population numbers in the 70’s , or 90’s in relation to today?

    • Grizzly Gus 6 years ago

      You should thank OSFI for the stress test and the US FED for rising interest rates. CMHC are the ones who insure mortgages and created the huge moral hazard in Canada where lenders are not on the hook for a lot of the loans they create.

      That being said, I like your shameless and uneducated self promotion. You are exactly the type of person I need for my new collection agency. Hit me up with your CV and resume!

    • C 6 years ago

      Yikes!! I wonder if any of the Mattamy Oakville buyers are clients of yours??

      It would explain a lot.

    • Justin Thyme 6 years ago

      Your welcome.

  • Max 6 years ago

    This is the most important article you’ve ever published on this site.

    Basically, you know the party is over and over for a good long while. We’ve had an amazing era of cheap money that has hyper inflated real assets. I’m telling my clients they won’t see home prices like today’s prices for another 6-8 yrs.

    It’s been a fun ride.

    Hello buyers market

    • Joe 6 years ago

      ” I’m telling my clients they won’t see home prices like today’s prices for another 6-8 yrs.”

      Adjusted for inflation, it may be more like 20+ years.

    • Justin Thyme 6 years ago

      Until next month, when everything changes yet again.

      Since when do two months define a trend?

      • @xelan_gta 6 years ago

        They don’t. Nobody is building forecast solely on price dynamics graph. You are probably the only one here.

  • C 6 years ago

    Any economists care to provide insight on what effect this is going to have on our economy?

    • Justin Thyme 6 years ago

      The stock market has never defined an economy. Putting money into stocks is putting money into something that already is paid for by others. Same with repurchasing bonds. The money is long spent by the originator.

    • MM 6 years ago

      “If foreign buying of the country’s bonds and stocks continues to slow then its currency may need to depreciate or its borrowing costs rise to attract the foreign investment that has bolstered consumption in recent years.”

      I’m no economist but I think that it was smart of OSFI to put in place their new borrowing rules during a time when 40% of Canadians have to refinance and the housing market in 2 very populated areas were quite strong. Too bad they couldn’t have done it sooner. I think they are trying to prevent an economic crisis due to the fact that they pretty much have to either devalue the dollar or raise rates.

      In a side note it is too bad that they don’t teach this stuff in school. I know very little myself but understanding the economy better, how bonds work, who our trading partners are, how as a country we make our money, would be extremely useful stuff for more of the general population to have a basic understanding of.

  • Bluetheimpala 6 years ago
    Enter everyone blaming the government/liberals for ‘screwing over everyone’ without understanding what is/was at play. 20 years from now when the Liberals reclaim a provincial government and maybe even a federal government, we’ll all look back at this bubble and the slash and burn cronyism the right will promote for the foreseeable future and wonder ‘Why?’. Canada was a beacon of hope for so many with openness and a liberal mindset that helped/protected so many. The current view by so many canadians so myopic it is sad, everyone sees the Left-leaning governments as the problem when they are just the government in power at the time of a horrible downturn. We will regret the jump to the right…we always do. Ho hum…BD4L.

  • question guy 6 years ago

    mortgage debt is still increasing, albeit not as fast as before, still increasing.

    with sales in the gutter how’s that possible?

Comments are closed.