Canada

Canadians Now Owe Over $260 Billion In HELOC Debt, A New All-Time Record

Canadians aren’t using their homes like an ATM. At least not as much as you would think. Bank of Canada (BoC) data shows home equity line of credit (HELOC) balances reached a record high in March. It barely did so, with a rate of growth so low it would be negative if inflation adjusted. This is really different from the last time home prices ran, which saw HELOC balances soar. 

Canadians Now Have $260 Billion Worth of HELOC

The outstanding balance of HELOC debt managed to squeeze out a new all-time record high. Outstanding balances reached $260.28 billion in April, up 0.47% from the month before. This represents an increase of 1.04% from the same month a year before. Most of us are used to seeing the monthly number continually advance, breaking record after record. This is the first time it’s reached a record since November 2020. Not that long ago, but forever in terms of Canadian real estate. 

Canadian Outstanding HELOC Debt

The outstanding dollar amount of home equity line of credit (HELOC) balances in Canada.
Source: BoC; Better Dwelling.

Real Canadian HELOC Debt Is Falling In Real Terms

The rate of growth was surprisingly low, in case you didn’t notice. The 1.04% annual growth in March is the lowest rate since August 2020. Since March 2020, the rate actually hasn’t breached the 2% growth level. In terms of real growth, this is well below the rate of inflation, and would therefore be negative. Shed a tear for your bank. 

Canadian Outstanding HELOC Debt Change

The annual percent change in the outstanding dollar amount of home equity line of credit (HELOC) balances in Canada.
Source: BoC; Better Dwelling.

No growth, so what’s the point? Sometimes it’s not what’s happening, but what’s not happening that’s interesting. Typically explosive home price growth leads people to take out their home equity. Due to the wealth effect, people that feel rich often spend like they are. 

This was the case when Canadian home prices accelerated in growth in 2016 and 2017. Now price growth is almost at a similar level, but households aren’t borrowing nearly as much HELOC debt.

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13 Comments

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  • Nassim 5 months ago

    Only 1% growth is interesting since that means the bank of mom and dad aren’t funding these down payments.

    • Mortgage Guy 5 months ago

      Not necessarily. Equity take-outs on refinancing have always been popular. If you’re renewing, why not take a few hundred k out for the kids. It feels like free money to some people.

  • Rob Turner 5 months ago

    Hot tub business must be hurting with just 1% growth.

  • Darragh 5 months ago

    Any idea why HELOCs are so popular in Canada, but we barely see them in the US any more ?

  • Trader Jim 5 months ago

    At 1% more than all of that is just interest. What’s going on? You’re right, this is kind of weird.

    • Jimmy 5 months ago

      Mortgage instead of HELOC’s because of rate would be my guess. 5 year rate is targeted by bank of Canada.

  • Trader Jim 5 months ago

    Feel free to ask around if HELOCs have been suspended at banks like in the US, or if they’re reducing the balances of existing ones. That’s an interesting story if they’re following the US.

  • Jester 5 months ago

    Canada, the land of opportunity to voluntarily enslave yourself for life without a chance of parole. This is the best system ever! Instead of having to catch and maintain your slave, the otherwise free people line up for slavery and think it is a privilege to join ranks with other slaves in their quest for renting depreciable stuff that they hardly have time to consume after days at the salt mine. Wash, rinse, repeat for 30 years. Then you die. Have fun!

  • Axel McLion 5 months ago

    Maybe Canadians don’t have any equity left in housing to borrow from? Could we get a chart of total equity Canadians have in housing to compare with total debt in HELOCs and mortgages?

    • Nathan Horton 5 months ago

      I would say Canadians have many billions worth of equity left to HELOC

  • Leftover 5 months ago

    Good news on HELOC’s might be offset by bad news on reverse mortgages, which apparently are soaring. Why take on debt when you can get the money for “free”, at least until you sell or croak.

    I wonder how many people are familiar with the rule-of-72? It means that whatever you took out of your house @ 6% will double in 12 years. Could lead to some unhappy inheritors.

    Anyway, it would be interesting to know how reverse mortgage growth compares with HELOC’s.

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