Canadian real estate debt is at epic levels, but who are these people borrowing? The Canada Mortgage and Housing Corporation (CMHC) and Equifax provided us with a breakdown of debt, shedding a little light on homeownership at the end of 2017. Despite elevated home prices across Canada, there’s over a million Millennial homeowners. Even more surprising is there’s even more older Canadians with a lot of debt attached to their home.
A Quick Note About The Data
The data we’re using today is from Equifax, and it underestimates the amount of total mortgage debt. For example, Equifax reports the total outstanding mortgage credit at $1.2 trillion at the end of 2017. Meanwhile, the Bank of Canada reported it at $1.49 trillion during the same period. Both exclude private mortgages, an increasingly important part of Toronto real estate. That said, it’s one of the most comprehensive profiles on borrowers. It’s worth a dive through to understand the vast majority of Canadian household debt. Today we’ll just be looking at age cohorts of mortgage holders.
Older Canadians Hold The Majority of Mortgages
Over 1 in 10 Canadians have an active mortgage, the majority held by older Canadians. The data shows 5.94 million active mortgages at the end of 2017. Breaking that down, the largest segment of borrowers are between 45 and 54, holding 1.604 million mortgages. The second largest cohort is between 35 and 44, holding 1.544 million mortgages. Millennials, aged 35 and under, held an estimated 1.009 million mortgages at the end of 2017. People aged 45+ held 57% of the total number of active mortgages.
Canadian Mortgage Holders By Age
The number of mortgages held by Canadians of different age groups at the end of 2017, in thousands.
Source: CMHC, Equifax, Better Dwelling calculations.
Canadians Over 55 Hold Over $277 Billion Worth of Mortgage Debt
Younger Canadian cohorts have the most debt, but older Canadians are far from debt free. Canadians aged 35 to 44 hold $362.4 billion in mortgages, the largest cohort of mortgage holders. The second largest group is between 45 and 55, with $326 billion in mortgage debt. Most interesting is people over 55 still owe a massive $277 billion on their mortgages. Owing over $155k going into your twilight years isn’t everyone’s idea of fun, but whatever floats your boat.
Canadian Mortgage Credit Outstanding By Age
The dollar value total of all mortgages held by Canadians of different age groups at the end of 2017, in millions.
Source: CMHC, Equifax, Better Dwelling calculations.
The most notable takeaways that break narrative are on Millennials and older Canadians. There’s quite a few Millennials that own a home, with nearly 1 in 7 holding a mortgage. Older Canadians, that have been building equity for a long time, are still holding onto a lot of debt. Didn’t the latter buy at the bottom?
Like this post? Like us on Facebook for the next one in your feed.
Be interesting to know if the seniors are holding new debt, or is this debt held from ages ago. Lines for pre-sale condos seem to be composed of more Boomers than Millennials. “investment grade” of course.
We know boomers have been using their houses like piggy banks, and the bubble has been building for so long that in many cases over time their overall debt been amalgamated and rolled over into increasingly large mortgages. The expectation seems to be that although there’s no way to pay off the mortgage, the plan is to downsize, pay off the debt, and have enough left over to supplement OAS/CPP.
Going to be a lot of heartbreak as house prices tank amidst rising interest rates, and companies start cutting jobs.
During the same period, Divorce rates have increased quite quickly for the aged 45-55 in the last 10 years so we can speculate that the outstanding mortgages are due to net new mortgages with double digit years for amortization (buying more with less purchase power or buying for another marriage).
Only a third is the prime buying age. That’s a little disturbing.
Another example of how the ‘ladder up’ housing model is completely broken and is in the process of normalizing. Will it go back to where it should? I don’t think so but where we’re at right now is unsustainable. That’s what sent off alarm bells for me 2 years ago; how can housing be sustainable when you need $140K+ AND/OR (generally AND) a minimum of $200K when saving rates for the last 10 years have been non-existent. My circle all comes from families with modest means and when none of us can get in or have to beg/borrow to do so, it says something. I know a tech sales guy who makes $150K+ a $24-50K a year in bonus who complains about not having enough money because his fucking mortgage is $800K with $200K down, daycare is $1500 a month, credit card and heloc are hundreds a month. I can assure you he isn’t living in an opulent mansion, just a nice detached in Etobicoke. That conversation was last year when shit was getting frothy…BD4L.
I have mentioned this before, but my sister in law bought her home 30 years ago for 135000.00. She currently owes over 250000.00 on a wartime bungalow, and shes 54 and her husband is 58.
But they will tell you how rich they are because their home is worth a half a million dollars. He fixes photocopiers and she runs a home daycare, so no fat pension in their futures….
I sold my wartime bungalow 3 years ago, because it needed 150000 in repairs. I have no debt, i work part time, i travel, i eat out, and my bank account grows every month.
They unfortunately have huge debt, mortgage and credit card, and at least 50000.00 in needed repairs (aging weeping tiles and sewer)
I only add this comnent, because it is unsustainable. They will paying off debt until they die. Even if they sold now, whoever takes on their bungalow is still looking at servicing a debt of over half a million dollars, for a tiny box that is old and still aging. So all that money, is still servicing debt.
And, they are talking about buying an investment property to rent out…..
If it werent so horrible, it would be hilarious. These are the people inflating the housing bubble, think about that before you take on any further debt.
Yes, that sounds like a lot of people who regularly walk into a bank to tap their equity, for a reno, to help adult kids, to buy rental property, to pay off credit cards that are maxed once again. And if the bank says no, there are other options………
The lijely reason the Equifax data is understated is because every month some records reported will reject for various types of mismatch errors for name, address, city, province. Equifax & Trans Union both have robust matching criteria to ensure the right info is added to the right customer file so if the info reported does not pass the required threshold, the record is not added to the customer’s file. If the reporting lender does not fix the problem with the info they are reporting, the record will continue to reject…month after month after month. Hence, the understated numbers. This logic applies to all types of credit records…mortgages, loans, lines, credit cards, etc.
This will be danger
Bigger issue is not the few data mismatches that occur but rather…
– Bank of Canada leakage (i.e. private mortgages outside the banking system which also were the cause of subprime mortgages meltdown in the USA).
– Also consider BoC uses CPI Inflation to set policy but does CPI Inflation really capture prices for what people really spend these days? (i.e. in 2018, people are not really buying milk or apples, its a lot of fast food and restaurants instead lol)
How many people, who bought their homes 20-30+ years ago are now dippinginto a PLC
(homeequityloans) to help sustain themselves since the 2008 recession? These people can no longer keep up witht he ever increasing cost of living. how many are dipping into PLC for home repairs, vehicle repairs, children’s education and the list goes on. The average income earner no loner has much left after paying mortgage/rent, vehicle Ins/gas, utilities, property taxes, house Ins and food.
If it wasn’t for property values sustaining these expense burdens, the economy would have tanked a long time ago.
Added to all of this is not only oil prices driving increased costs but #DirtyMoney extensively being invested in the economy, making it seem more stable than it really is.
Meanwhile, Trudeau is focused in bringingmore people into Canada and expecting Cdn taxpayers to fund the millions required for Migration/Immigration/refugee programs for people wanting to come to Canada.
“Meanwhile, Trudeau is focused in bringingmore people into Canada and expecting Cdn taxpayers to fund the millions required for Migration/Immigration/refugee programs for people wanting to come to Canada.”
That’s true in a very short term and myopic point of view. There is ample evidence to show how immigration has great long term benefits. So many people hated on Trudeau the 1st for his immigration policies and yet Canada is in a great place now because of it. (For the record, I did not vote for Trudeau!)
It would be interesting to know how many of the Boomers used their mortgages to fund their children’s (millennials) education and/or mortgages.
Unless income and saving rates suddenly skyrocketed it is fair to assume a notable portion of this debt is tied to familial gifting or lending but…remember, the lending wasn’t as binary as old 55+ to young -35…the reality is a lot of older, lower income individuals received funds from their elderly parents. In my mind, someone taking out money from their asset to pay for education or a business venture is somewhat justifiable but what has been going on is renovations, widgets and general stupidity. When people are given something from nothing they suddenly seem to think they are geniuses and the party will never end (like syphilis…reminder: get pills). BD4L.
Probably not as many as you think. My parents, both immigrants, with their average salaries, bought their house in the 70s for $60K, with high interest rates of the day. Paid it off in 5 years. Yes, they were insane. Paid for my and my sister’s education out of pocket. And they have a decent retirement portfolio. However, they did not buy anything with the label “luxury this” or “luxury that”, and they didn’t go on exotic vacations every year. They were cheapo and never threw anything out. Lived within their means and burned their mortgage to the ground. Nobody does that these days. Not with record low interest rates that make having debt so affordable and attractive, people would rather hoover up debt than live within their means on a budget.
My grand patents saved, invested and retired debt free with 1.5 million in the bank (1989). One was a seamstress from the age of 16 until 65; the other a mechanic in a small local indie garage. They took a vacation every 10 years, renovated their one and only home, after 40 years. A whole retirement life of travel was planned out and fully financed.
On the last day of work, after the goodbye party, the seamstress was on the way to the bank with her last paycheck and was run over by a bicycle. Her brain was destroyed in the collision. Her husband had a major stroke from the stress and died within a year of her accident. She lived 25 more years in a hospital, physically alive, but mentally non functioning.
You have to live for today, if you defer life too long, your timesheet on earth might punch out before you can collect your rewards. Yes, plan, but keep things in perspective.
Sure, live for today, but take pleasure in the things and experiences that you can afford, without hurting ‘future you’ by stacking up ridiculous debt that will hurt your future self.
Do you really need a Rolex watch? No. You just ‘want’ it. Buy a Timex. Do you need retirement savings? Yes. So figure that out. Use your common sense. And don’t be an easy target for marketers trying to push you on the latest and greatest thing that you don’t actually need.
People have a hard time discriminating between ‘want’ and ‘need’, as they are vastly different, and are priced accordingly.
This doesn’t really break down primary v investment property. There’s nothing wrong with controlling investment property with mortgages. In fact, it would be absolutely silly to own investment properties free and clear. The government devalues the dollar 2%+ every year and there is no interest expense to offset the income. Given that only older folks can afford investment properties, this data actually makes sense.
I would only worry if the debt is used to finance non-income producing assets like a primary residence or vacations…. Another worry is if there is a lot of debt that can’t be serviced by the rental income… which is obviously the case in Toronto and Vancouver.
*correction. The house value is a made up number, not the equity.