Canadian Mortgage Payments Are Taking Up A Record Share of Income

Canadian real estate is sucking up the oxygen in the room once again, as rising rates pinch households. Statistics Canada (Stat Can) data shows households are spending a record share of their disposable income on mortgage payments. Rising prices and rates are consuming even more income for payments than during the 90s bubble. However, this isn’t a general trend as income spent on total debt resurfacing is lower than it was just a few years ago. 

Canadian Mortgage Debt Is Taking Up A Record Share of Income

Canadian mortgages are taking up a record share of household income. Mortgage payments averaged 0.57 points higher over the past year to consume 7.66% of income in Q4 2022. That’s roughly $1 for every $13 in disposable income earned across Canada going towards servicing their mortgage debt.

Canadian Mortgage Debt Service Ratio

The share of Canadian household disposable income spent servicing residential mortgage payments.

Source: Statistics Canada; Better Dwelling.

It’s a big shift from the start of this decade, and higher than Canada’s last big real estate bubble. The last quarter was 1.57 points higher than the decade-plus low seen in Q2 2020, when rates were cut to record lows. The current share is also higher than the 90s real estate bubble, which peaked at 6.95% of income in 1991. Now when people say, “it’s always this hard,” you have a data point to shut them up.  

The trend is a combination of the recent surge in home prices and higher interest rates. Rising rates have helped to slow, and reverse price growth—but it simply just hasn’t had enough time to bring prices low enough. Two years of record low rates inflated home prices higher than two months at this level can bring them down. That shouldn’t surprise anyone.  

Households Are Spending A Smaller Share of Income On Total Debt

The good news is this isn’t a general trend amongst Canadians. The total debt service ratio, consumer and mortgage credit, is up 0.61 points to 14.33% of incomes in Q4 2022. Households are dedicating the largest share of income to debt servicing since Q1 2020, but it’s still a smaller share than households had in 2019. Not exactly a panic inducing level, and even more interesting with mortgage payments. Households are paying more on mortgage debt but less on other types of debt. 

Canadian Debt Service Ratio

The share of Canadian household disposable income spent servicing debt payments.

Source: Statistics Canada; Better Dwelling.

Various reasons are behind this trend, including deleveraging and rising incomes. People paid down significant consumer debt over the past few years, with low rates bringing interest costs down. We’ve also seen incomes rise over the past year to keep with inflation, reducing the nominal burden. 

Population growth is another interesting factor to consider, and we’ll discuss this further in depth later. Canada’s population boom is no doubt building credit service capacity that has to take out debt. This adds to the income column while consumer debt has yet to rise, helping to dilute the burden at the national level. Households are still highly indebted, there’s just more new households that have yet to take on debt. 

Mortgages are taking up a greater share of income, but consumer debt isn’t. While this sounds like great news, it does leave questions about consumption. When paired with the elevated savings rate, we’re not seeing rising household consumption for anything but housing. That can be a sign the economy is further concentrating down the path of housing, leaving it more vulnerable to shock in the event of a sudden shift.



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  • Ike 1 year ago

    Those numbers look low. Way too low. Unless every Canadian suddenly started making 250k+ a year

    • Ray 1 year ago

      It’s all lies, That’s all this government does. They’re just trying to keep everyone from panicking. Story out of India Times
      750k students coming to Canaa for 2023. Many already sleeping in homeless shelters. Nobody told them how terrible and unaffordable Canada really is.
      So who’s buying these homes still because it sure isn’t the normies.

    • Tor 1 year ago

      I’m wondering if that’s due to a large portion of the population not being homeowners, and this statistic looking at all income across Canada without accounting for rent payments.

    • Dan 1 year ago

      I think it’s being skewed downward by the households who do not have a mortgage and households that have a small balance. But for the purchasers of the last few years and the people who want to buy, it’s scary.

    • Jo 1 year ago

      Right? Somebody forgot to carry a zero…

    • J 1 year ago

      Share of Disposable Income – income that was free to spend/invest into other things. This in ontop of the monthly budget already set aside for the existing mortage. It is low since the share of variable mortages are low in Canada. So, concentrated at the recent variable binge. There are a lot of desperate household holding the perverbial bag at the end of the boom. Last in – first out: the next 24 months will be interesting with so much debt globally. It will come as a liquitity crunch once again (imho).

    • Johnny 1 year ago

      What someone already said. These numbr don’t seem right at all unless everyone became a brain surgeon recently.

  • Based on What Evidence? 1 year ago

    I’m curious to know if variable rate mortgages held by Canada’s big banks that have been re-amortized for as long as 40 years has been accounted for in this analysis? Folks caught in the 90s interest rate spike didn’t have such a option. Perhaps, the r/e troubles of the early 90s haven’t been topped quite yet?

  • Rohit 1 year ago

    Ofcourse it is taking up more income. However, why does Canada not adopt the 30 year mortgage that is so common in USA. Why is it that Canadian banks offer and encourage everyone to take either a 5 year fixed or 5 year variable. The people in USA who refinanced and locked a 30 year mortgage at less than 3% before the interest rate hikes didn’t get “lucky”. It’s the USA banking system that allowed their people to utilize the golden opportunity provided to them that is never made available to Canadians by our banks. Canadians could not have taken advantage of the low interest rates beyond the usual 5 year nonsense. It doesn’t make sense to be forced to renew a mortgage every 5 years at different rates when the amortization period is 30 years.

  • ERIC J. LAVALLEE 1 year ago

    Simple solution kill the bankers

  • Rohit 1 year ago

    Who deleted my comment?

    • Better Dwelling 1 year ago

      Hi Rohit,

      Just following up to clarify that your comment was published shortly after. However, sometimes it takes up to 24 hours for the comment to appear due to various factors including caching or WordPress flagging it for manual review due to no IP history. We’ll be solving this in the coming weeks with authenticated user accounts.

      – BD Support

  • S.R. 1 year ago

    We have more to go, if you are an investor or homeowner hoping to hold on, I would head for the exits. The point of this tightening is to purge the excess money from the money supply, this is done through wealth destruction and only the strongest will survive.

  • Infit 1 year ago

    Can we get the govt out of the gig of guaranteeing sub-prime mortgage defaults (via CMHC) for banks that created hundreds of billions of those junk loans? Banks that created those mortgages or private insurance companies should be guaranteeing mortgage loans against default, NOT the public.

    When banks bare none of the down side and all of the upside of creating junk mortgages, it is moral hazard.

    This was already made abundantly evident from the 2008 crash in the US. Yet the banks here were urging the govt to keep doing the same in Canada and the CMHC just went along with it.

    Who really is the CMHC working for? Certainly not the people who they are sending the bill for mortgage defaults.

    Now the only bright idea the Bank of Canada (which bought 180 billion of those junk loans in 2020) can come up with is printing money to keep the real estate prices high so it does not go into a mass default. But in doing so, it is destroying the real economy and distorting capitalism – which these days looks like Crony Capitalism.

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