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 DebtThe 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 ChangeThe 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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