Canada

Canadians Add An Average of $187,000 Per Minute To The Household Debt Balance

By the time you’re finished reading this sentence, Canadians will have added $9,354 more to their debt pile. That is, if they continue to borrow at the same pace they did in July, according to Bank of Canada (BoC) numbers. Households in Canada pushed the balance of household debt to a new all-time high in July. The (kind of) good news is the debt binge is slowing down fast, so the total balance may top in the not so distant future.

Canadians Owe Over $2.13 Trillion In Debt

In the least surprising thing you’ll read today, Canadian household debt lept to a new all-time high. The balance of outstanding household debt reached $2.13 trillion in July, up $77.9 billion from last year. The increase works out to a 3.77% higher compared to the same month last year. Let’s break that down, and see where Canadians are spending their money.

Canadian Household Debt Outstanding

Total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

Canadian Households Owe Over $1.52 Trillion In Mortgage Debt

We gave a detailed breakdown of Canada’s mortgage debt last week, but we’ll touch on the record high numbers today. The balance of mortgage debt reached $1.52 trillion in July, up $54.2 billion from the same month last year. The increase works out to a rise of 3.7% compared to the same month last year. The eyes of bank execs must twinkle when they hear this news, combined with rising interest rates.

Canadian Households Owe Over $616 Billion In Consumer Credit

The rest of debt is from consumer credit, which also hit an all-time high. The balance of consumer credit reached $616 billion in July, up $23.7 billion from the same month last year. The annual change works out to an increase of 4%, just a touch above mortgage growth. Consumer debt is lower, but growing at a much faster pace.

The Growth of Household Debt Is Rapidly Decelerating In Canada

The most interesting takeaway is not how big the debt pile is, but how quickly growth is shrinking. Mortgage credit’s annual gain was 3.7% in July, a tad over 40% lower than the same month last year. This is the lowest it’s been since June 2001, so we haven’t seen this segment grow this slow in quite some time. Consumer debt saw an annual gain of 4% in July, down 20% compared to last year. The segment last grew this slow in September 2016, which is a little more recent, but still quite some time.

Canadian Household Debt Change

Annual percent change in debt held by Canadian households.

Source: Bank of Canada, Better Dwelling.

The Canadian debt binge is slowing down, which is ultimately a good thing. However, after a binge like that, there’s usually a hangover to deal with. Say good-bye to quick debt driven economic growth, and hello to paying back all of that debt. BTW, this article would take the average person about 5 minutes to read from start to end. That’s roughly how long it took Canadians to add $748,384 to the debt pile.

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18 Comments

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  • Fraser 2 weeks ago

    Big, big POP coming…many countries have seen housing crashes over the last 20 years but Canada has not. We are over due. I think we are in the beginning of one right now, and its going to get ugly fast…this will be fun to watch from the sidelines. Be patient folks, pay off all debt…you will be getting your next home, 50%, to 70% cheaper, maybe more…just be patient, its coming…lollllllllll

    • neo 2 weeks ago

      Fraser,

      If houses are 70% cheaper in Canada you and I won’t even have a job. There would be a great depression that would make the 1930’s blush. There wouldn’t be any “fun from the sidelines”.

      • Talia 2 weeks ago

        A 70% decline is unrealistic. I know the news in Vancouver is parading clowns that say a 50% decline is coming, but the government can’t/won’t accept that much depreciation. Anything that wipes out the all homeowner equity is probably out of the cards. The Canadian government would sooner go negative on rates.

      • Bluetheimpala 2 weeks ago

        If I have a tulip bulb that had ‘a market value’ or ‘cost’ of $100 correct to a sustainable level of $1.10 the bigger question in my mind is ‘was it ever worth $50?’. This is going to be the biggest concept people are going to struggle with because housing for most is not and never been an investment like a stock or a widget or a commodity. It is a house, a home, a place where we put down root so when the media/bankers/brokers/agents/friends/neighbours told us ‘well that’s the price’, what was the regular guy on the street to do?,…I think people will look back at this even in 10-15 years and scratch their heads at how we got in this mess and why regulators, some major media outlet and our politicians didn’t step in at all. Tick tock. BD4L.

        • Werry 2 weeks ago

          Exactly. Developers always argue that land costs A and labor costs B, so the price is C + margin. They don’t seem to realize there’s no reason land will always cost A, and there’s no reason that labour will always cost B.

          If the price of a house is based on “supply and demand,” then so are the components of building that house. Land has been prone to miscalculations in pricing for decades now, usually fluctuating with interest rates. How Canadians can be convinced that there has never, and won’t be a miscalculation, is mind boggling.

      • Norbert Schumacher 2 weeks ago

        Anecdotally, houses cost ~ 3k to rent per month in Vancouver proper. We can call it 3.5k (you can get some really nice ones for that). Generally, it doesn’t make sense to buy a home if the number of years of rent equal to the cost of the home exceeds 20. In this case 20 years of rent is 3.5x12x20 =840 k. This would be down from 1.85 million. (>50% reduction). Under the same situation, the ROI actually starts to make sense as investor 3.5×12/840 = 5% ROI. The ROI is currently <2% on average, <1% on the west side of Vancouver (I rent there because math). So…"fun" it will be for the masochists when the return to fundamentals arrives.

  • Mack 2 weeks ago

    Keep in mind this is *after* payments are considered. Theoretically, payments should be whittling away at the balance, but we’re creating credit faster than people can pay it off at an unbelievable rate.

    • Matt 2 weeks ago

      How many are interest only loans though? The balance of a lot of existing homes might just be flat, and rolling uphill.

      • Werry 2 weeks ago

        Not a lot. This number is only institutional lenders. None offer interest only loans, you have to make principal loans as well. Private lenders are where you get interest only loans, but not even the government is sure how many private loans are in existence. Anyone that can borrow their HELOC, can become a private lender.

  • Patrick 2 weeks ago

    The Canadian homeowner is now too big to fail. They won’t let the housing market crash, because it would take out the whole economy. I’m actually bullish on housing after this news.

    • Ahmed 2 weeks ago

      Bullish on housing, bearish the dollar? Housing can go up, we just need hyperinflation to devalue the debt. We’re about to give Zimbabwe a run for it’s money if we keep this up.

    • vnm 2 weeks ago

      Doh! That’s what they said in the early 90s when there was both a crash and a deep recession. Back then they could have cut interest rates, but didn’t, this time around there’s nothing left to cut.

    • Asterix1 2 weeks ago

      If you are not already working as a real estate agent, please, I beg you to contact Remax, they need people like you!

      They value agents who have zero analytical skills, believe everything they are told and make up their own theories on the direction of the market.

    • SUMSKILLZ 2 weeks ago

      Umm, seems all those homes in my Aurora working class neighbourhood that sat unsold all summer long, are now selling in September. I’m speculating folks lowered their prices, but I don’t know that based on any evidence. I was just surprised to see all the “sold” tags applied to tattered realtor signs that have been up for months and months. There was also a bunch of “coming soon” realtor signs which I had not seen since 2017 in my area.

    • Tom 1 week ago

      You are absolutely right. Been investing for 30 years and all these negative comments are based on stupid math that doesn’t take into consideration all variables/ metrics.

  • Rou Rou 2 weeks ago

    Holy cow. This doesn’t include private lending debt either? Or overseas debt used as collateral for this debt?

  • Contrarian 2 weeks ago

    Property “value” goes up and down but, over the long run and that depends if you are around long enough with property, it is always up well over inflation. I know because I have benefited from that every time I sold a house.

    • Grizzly Gus 2 weeks ago

      Whens the last time you bought and or sold?

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