Canadian New Mortgage Lending Shrinks 19%, Lowest Level Since March 2020

Canadians are suddenly borrowing a lot less mortgage debt these days. Bank of Canada (BoC) data shows new mortgage lending contracted in December 2021. New lending, including new mortgages and refinancing, fell to the lowest level since March 2020. It’s a sudden reversal for borrowers as price growth hits a fevered pitch and higher rates loom.

New Mortgages Debt Fell To The Lowest Level In Almost 2 Years

New mortgage lending ground to a halt despite booming home price growth. In December, lenders created new loans worth $38.8 billion, down 11.9% from a month before. This is 18.7% lower than the same month last year. A lot of points to take away from these numbers, but the size is the key point. It might be a lot of money, but it’s the smallest sum of funds borrowed since March 2020. Let’s see how this breaks down by type of mortgage.

Canadian Total New Mortgage Lending

The total value of monthly new lending for mortgage debt, including new mortgages and refinancing.

Source: Bank of Canada; Better Dwelling.

Canada’s Insured Mortgage Borrowing Fell 42%

Insured mortgages, with a downpayment smaller than 20% and often first-time buyers, fell. A lot. New loans came in at just $6.2 billion in December, down 17.4% from a month before. Compared to last year, the segment is 41.3% lower. Fewer dollars for uninsured loans haven’t been seen since February 2019. That was in the before-time, when things were different and interest rates were 1.75%. It might seem odd to see a drop considering how cheap mortgages are right now. However, investors competing against end-users with record price growth, likely explains it.

Canadian Total New Mortgage Lending

The total value of monthly new lending for insured and uninsured mortgage debt, including new mortgages and refinancing.

Source: Bank of Canada; Better Dwelling.

Uninsured Mortgage Borrowing Falls 12% In Canada

Uninsured mortgages, which require at least 20% down, show a less extreme contraction. New loans for this segment came in at just $32.6 billion in December, down 10.8% from a month before. Compared to last year, this segment is 12.2% lower. A 12.2% drop is huge, but it might not seem that way compared to insured mortgage debt. Just the fall for uninsured was equivalent to over half the total of insured lending.

Canadian mortgage lending is still elevated compared to when rates were significantly higher. It’s beginning to slow as fixed term rates rise and higher lending rates approach. There are still a lot of mortgage funds tapped through new loans and refinancing, though. It’s an elevated level of borrowing helping to fuel the rise of small investors, and likely to persist until rate normalization occurs.

2 Comments

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  • Agent bob 10 months ago

    No surprise 1st time buyers mortgages fell by 42%; they can’t afford a home anymore.
    No surprise buyers with at least 20% down also fell 12.2% ; a lot more of them can’t afford a home either.
    Many money launderers and non- residents don’t require a mortgage and they are the main drivers of the unhealthy price increases and are buying up vast quantities of real estate.
    The government has failed the Canadian people by not addressing these issues years ago.

    • Richard Allen 10 months ago

      I was going to suggest that. Could house prices be pushing new buyers out? maybe some of them are getting to the bank, sitting down, seeing what the monthly payment is, and Nope-ing on out of there?

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