Canadian Real Estate Buyers Are Taking Out Fewer and Smaller Mortgages

The decline in Canadian real estate sales is hitting the mortgage market. Equifax data via the CMHC shows a large decline in the dollar volume of mortgages issued in Q4 2018. The decline is the result of fewer originations, that are smaller in size than previous years.

New Canadian Mortgage Debt Issued Falls Over $27 Billion

The total dollar volume of mortgages borrowed is seeing a large decline. Only $58.73 billion in mortgages originated in Q4 2018, down 8.44% compared to the same quarter last year. Compared to the same quarter in 2016, this is a 12.9% decline for quarterly dollar volume. Most quarters in 2018 came in under the volume seen in 2017, with the exception of the first. Even so, the first quarter experienced growth smaller than inflation.

Canadian Mortgage Originations Dollar Value

The dollar value of mortgage originations issued in the quarter, across Canada.

Source: CMHC, Equifax, Better Dwelling.

Lower dollar volumes are adding up to a substantial decline for the year. There were $237.01 billion in new mortgages originations in 2018, down 10.30% from the year before. That’s on top of the mild decline seen in 2017, which was 1.68% lower than the year before.

Canadians Are Taking Out Fewer Mortgages

Breaking that number down, fewer mortgages were a major contributor to the drop. There were 222,000 new mortgages in Q4 2018, down 5.13% from the same quarter one year before. Compared to the year before that, the number was down 12.25% – a huge drop off in the number of buyers.

Canadian New Mortgages Issued

The number of mortgages issued in the quarter, across Canada.

Source: CMHC, Equifax, Better Dwelling.

Canadians Are Opting For Smaller Mortgages

Canadians that are borrowing mortgages, are opting for smaller balances. The average outstanding mortgage balance was $269,000 in Q4 2018, down 3.93% from the year before. That also works out to a decline of 1.10% from the same quarter in 2016. Borrowing is back to levels last seen prior to 2016.

Canadian Average Balance of New Mortgages Issued

The average balance of mortgages issued in the quarter, across Canada.

Source: CMHC, Equifax, Better Dwelling.

The decline in mortgage originations and size aren’t due entirely to stress testing. Stress tests reduces the maximum mortgage size, but originations were declining prior. The number of originations peaked in 2016, and have fallen since.

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  • Avi 5 years ago

    You’d have to be nuts to jump into bitcoin at $19,000 after making a parabolic move. I mean, Toronto condos.

  • Michael E 5 years ago

    Fewer buyers aren’t a big deal. It means they’ll all be forced to buy in a smaller window at the same time later. Cities like Vancouver are overinflated with money laundering, but that has no impact on places like Toronto which are underpinned by strong economic fundamentals.

    • Joseph 5 years ago

      Hi Michael, an honest request; can you please provide the strong economic fundamentals in Toronto that you mention?

      I want to see what you speak of and do some research.


      • Mtl_matt 5 years ago

        He’s out of his damn mind. Throw out the real estate construction job, related real estate jobs (realtors et al) and the related financial jobs (mortgage origination, etc) and Toronto’s economy will take a huge hit. Fewer buyers is a huge deal.

      • Manu 5 years ago

        I guess the strongest point Toronto has is that we are intentionally late in launching policies e.g disclosure of real beneficiary, registar showing ownership details/ higher taxes on properties by corporates etc.

        We are in a environment in which if we work honestly and rightly we will see prices fall.

      • GB 5 years ago

        It’s all about jobs in Toronto -according to Stats Can nearly 50% of all new jobs in Canada since Jan have been in Toronto. 94k more people employed. Since January alone.

        The brain drain that plagued for years has turned. More and more technology coming to Toronto. Thank you Trump.

      • Ryan 5 years ago

        By far, the CMA of Toronto had the largest share of foreign-born of these urban centres, 37.4% of all foreign-born in Canada. The population of Toronto is 2,731,571 (source: Statistics Canada). This makes Toronto the largest city in Canada and the fourth largest city in North America.
        Unless you are relocating to another country, Toronto is the largest city with economic fundamentals in Canada.

  • Oldguy 5 years ago

    So you think that there is no money laundering in Toronto? Do you live on the moon?

    • Just another poster 5 years ago

      I think what he’s trying to say is that Toronto has strong economic fundamentals to somewhat justify our prices (along with easy lending and cheap credit). This should be a stark contrast to Vancouver which has no economy to support 3m price tags for mediocre homes. Vancouver is obviously inflated by foreign capital and money laundering.

      Toronto, like any other major city, will have some of challenges noted above but the majority of the price action is driven by local and foreign speculation in a new asset class to absorb global cheap credit.

      Everyone who expected inflation due to QE (myself included) didn’t see the potential for cheap money to flow into assets instead of consumer goods (e.g., food, appliances, etc.). So now we have massive inflation but in asset (home) prices, which sadly isn’t counted in CPI.

  • JM 5 years ago

    Only reason why sales went up in April in Toronto compared to April 2018 was because all the Money Launderer’s that can’t buy in BC right now are spreading they’re dirty money across the rest of the country where it’s still legal and promoted by the Liberals and the housing industry.

    • MoMo 5 years ago

      Prices and volumes up again in May – so far.

  • JM 5 years ago

    It’s obvious the Mortgage numbers published in this article are mainly from the Big 6 Banks and aren’t including the Private Mortgages that more and more Canadian’s are using on a much higher scale in the last year or two. These private mortgages are supporting the high risk buyers that can barely afford a place to own and have much higher mortgage amounts. If all the risky, higher amount mortgages are going to the private banks, it makes sense why the average mortgage amount in this article has been dropping the last year or two.
    Everything is lining up in Canada like 2007 was in the US.
    tick, tick

    • HOMEPOOR 5 years ago

      I agree with you but to an extent, we don’t have the same NINJA loans (no job no income no assets) as it was the case in the US pre-2008. However the largest lender in Canada offering the closest thing to these type of loans was Home Capital Group. Its to be noted that they faltered in Spring 2017 if my memory serves me right… and that coincides with the near top in mortgage values and volumes. So yes it will have repercussion in Canada just not as important as in the US.

      • Ethan Wu 5 years ago

        No, we definitely do. There’s a surprising amount of assets secured against ghost assets in foreign countries. Mortgage fraud is the number one form of real estate fraud for a reason.

        Even so, it’s a myth that’s been disproven many times that the US bubble was a result of NINJA loans. Wealthy investors were the strongest demographic to default and enter foreclosure, while poor people paid bills at the same clip they always did.

        It was high credit scores investors with second investment properties that led defaults, not poor people without other assets. There was a thorough breakdown of the issue on BD a few months ago.

        • SUMSKILLZ 5 years ago

          My bank used to have a huge whiteboard saying if you can put 35% down, we’ve got a loan for you. It was up maybe from early 2015 until November 2017.

          I was in line the other day, and the person in front of me asks the teller if the bank still has that 35% loan offer, and she turns red and says, “we don’t do those anymore.” Hummm, how many did they do?

  • DB 5 years ago

    I think What Wile E Coyote…I mean Michael E is trying to say.. Don’t worry be happy,,,,you live in Toronto…By the way would you look at my listings there might be something there you like…I may be able to get it for you cheap. LOL

  • Rick Abrams 5 years ago

    So from whence do developers believe all these new buyers are coming? This decline sounds like a wise adjustment to the “density folly,” which imperils the entire economy. Canada and Australia are farther down the road of Smart Planning, which is primarily a mechanism to transfer wealth to the top 1%, but with less corruption than we see in the United States. If my assumption that Canada has not gone hog wild into corruptionism like Los Angeles, these adjustments are a good sign.

  • Rana 5 years ago

    Buyers are scared of inflated logic less media reports

  • Rico 5 years ago

    unfortunately you cannot fight the demographic and economic cycles, the truth is the easy money has been burned up, which fuelled this worldwide inflation in home prices. Demographically speaking we are all slowly but surely going to be hopefully cashing in on our nest egg retirement home. But where are the buyers going to come from. So the best way to entice buyers is with lower prices, and so this will be the cycle for several years to come now until we have all out panic as baby boomers want to try and salvage what they can from their homes value to help supplement theirsurvival retirement. And of course the dumb money who bought at the top of this are hugely overextended.
    Home prices went up way higher then anyone anticipated.Now they are going to go way lower then anyone anticipated

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