Low Growth? Canadian Mortgages Are On Track To Go Even Lower

Canadian real estate sales are trending lower, and taking mortgage growth with it. May’s numbers from the Bank of Canada (BoC) show we’ve hit the lowest pace of growth in years. Despite the low levels of growth, this number appears to be heading even lower.

Annualizing Data To Understand Performance

First, you’ll need to know WTF is annualizing data. Annualizing a trend is a quick and easy method of tracking growth. It sounds complicated, but it’s just taking a short period and projecting for the whole year. This allows us to compare short-term growth to the long-term trend.

Reading it is much easier than calculating it. If the shorter annualized period falls below the long-term, expect numbers to taper. If the shorter annualized period rises above the long-term, expect it to increase. It’s nearly impossible for the long-term trend to do otherwise. The BoC commonly uses 3-month annualized trend, so we’re going to stick with their numbers for today. If it’s good enough for the country’s central bank, it’s probably good enough for you, your Majesty.

Canadian Households Owe Over $1.509 Trillion To Institutional Lenders

First, the total dollar value. Residential mortgage debt held by institutional lenders reached $1.509 billion in May, up $3.856 billion from last month. That represents a 4.4% increase compared to the same month last year. Remember, this is just large institutional lenders, so that excludes most private lenders. The debt levels are likely to be significantly higher, as private lenders become more popular.

Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Statistics Canada, Better Dwelling.

Growth Is Slowing, and Is On Target For Slow Even More

Record debt levels are leading to credit exhaustion, with no short-term bump in sight. The annual rate of growth at 4.4% makes it one of the lowest level since November 2014. Annualizing the balance’s  change over the past three months, we get a rate of 3.5%. The period being annualized is also interesting by itself. This is typically the busiest season for home shopping, and mortgages are showing low growth.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change, and 3 month annualized change, of outstanding mortgage credit.

Source: Bank of Canada, Statistics Canada, Better Dwelling.
Mortgage growth dropping at the busiest time of the year, doesn’t speak well for the market or economy. Higher interest rates and steep home prices deter new borrowing from buyers. They also force existing debt holders to spend more on servicing the debt they already have. As rates climb, it’s hard to see mortgage growth returning to its recent glory any time soon.

Like this post? Like us on Facebook for the next one in your feed.


We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Werry 3 years ago

    First comes the volume, then goes the price correction. Is anyone seeing upside pressure?

    Someone smart enough to realize that immigration does not guarantee greater home prices.

  • Ian 3 years ago

    You skipped the most important part, which is the lower these numbers go, the more people will have to pay to borrow. The BoC stimulated not all that much demand in the grand scheme of things, when you consider how much they hacked away at interest rates.

    • Tam 3 years ago

      Correct. Slowing demand leads to less interest from lenders, and higher risk premiums. It all works together, even if people don’t think they do.

      There’s like going to be 30 year mortgages in the not so distant future.

    • Bluetheimpala 3 years ago

      Good point. Everyone was scratching their heads when BoC paused but the banks increased. Either they were ‘being dicks’ as I heard someone say or they employee hundreds of analysts and spend millions on data services to help predict downturns and limit losses and are smarter than the guy on the street who only reads TREB, media and Uncle Tony analysis. Personally I think it is the former…bunch of dicks. BD4L.

      • Joshua McIntyre 3 years ago

        Well, one thought is that the banks base their mortgage rates on the 5 yr gov bonds, not at all on the BOC rates. They basically make the spread. Also, banks are more profitable as rates rise, they can generally make a larger spread.

  • Mortgage Guy 3 years ago

    If mortgage growth drops, expect lenders to make up the profit differences from existing borrowers. Since B-20, many recent buyers won’t have a choice other than to take whatever the lender offers them, since they can’t shop around without a test they may not pass. B-20 was a baaaad idea.

    • Grizzly Gus 3 years ago

      Thought the same before but it’s not that simple.
      They will a bit yeah but not the point where they break the borrower. In a falling market the banks do not want to have to take possession of your home to force a sale if it can be avoided. They would rather you keep paying. It will be newer buyers who are more susceptible to getting taken advantage of, but they are also the ones who have the least wiggle room so banks can only squeeze them so much. Plus there are credit unions to compete with………. banks might be fine with higher risk borrowers moving on.
      For those with lower mortgage balances, (who haven’t been using their homes as an ATM), sure the banks could try and squeeze a lot more out of this group then the super leveraged but these folks could probably pass the stress test and move to a direct competitor or avoid the test and go to a credit union. Therefore, if the banks are worried about lack of new business, why would they want to chase away existing business?

      • Grizzly Gus 3 years ago

        You could argue that B-20 should not have been applied to bank held mortgages being renewed by banks. I’d still have it apply to an existing borrower moving from a private lender to a bank though.

      • Mark Baum 3 years ago

        Don’t most of these mortgages get securitized though? (Ie. the bondholder takes on the majority of the risk)

        • Grizzly Gus 3 years ago

          I should look into that some more. I’ve heard that non insured mortgages have been getting sold off in higher quantities recently. CMHC backed mortgages definitely get flipped into bonds (still guaranteed) so not as risky.

        • Mark Baum 3 years ago

          EO that’s great info.

          So with these covered bonds the mortgages remain on CIBC’s balance sheet if I understand correctly.

    • Willy 3 years ago

      I personally think B-20 was a very good idea but it should have been implemented when interest rates dropped in 2015 and it should stay there until interest rates go back up to 6-7% and only then it could be dropped.

      • Grizzly Gus 3 years ago

        Good idea for health of banks, tax payers and economy (should have been done way sooner). Bad idea for mortgage broker income

      • Bluetheimpala 3 years ago

        Willy, you know I can ride you pretty hard…good post. Don’t let anyone tell you raising rates from historic (like for ever historic) lows are a bad thing when it saves us from ourselves. Like gun laws in the US; one can defend them but in the long run they only lead to more death. BD4L.

        • Grizzly Gus 3 years ago

          Actually thinking about getting my gun liscence in case someone tries to call in my Brampton Loan

          • Grizzly Gus 3 years ago

            Maybe a 2 by 4 would do

          • Bluetheimpala 3 years ago

            I’m looking at it from the other end Grizz. Thinking there might be high demand for these sort of ‘alternative lending asset re-appropriation’ services. Those Brampton margin calls are only going to ramp up! Might swing on by the local biker bar and see if I can recruit some employees, lol. Have a good weekend bud.

          • Grizzly Gus 3 years ago

            Let’s partner up! How about this for a name

            Igor’s Relocation Services;
            “Paying em a visit since 2018”

            Have a great weekend

  • vnm 3 years ago

    Meanwhile back on the farm the insightful G&M reports:
    Toronto housing market scores ‘snappy turnaround’ after months-long slump.

    • carlton 3 years ago

      Globe and Mail is disgraceful !

      Who is paying them to pump up Real Estate? wtf I can’t believe they still have readers, my god!……….

      • vnm 3 years ago

        Kinda shocking, and hard to tell if it’s because they don’t know any better, or have completely sold out. Seems like a toxic combination of both. And if we didn’t have the objective reporting and analysis of BD how would we know any different?
        It is usually the case that if you know anything about a subject, a newspaper article will seem superficial. But to be so completely out to lunch, and to get things so completely backwards, good question, how do they stay in business? No wonder the newspaper biz is in such trouble.

  • Henry Baker 3 years ago

    The whole corrupt financial system has to be changed! Interest rates should be never changed because it is against the law. Pure discrimination. I have money in the bank and get more if interest rates are going up, but my neighbour (Who is borrowing my money)and is already strugling to pay his mortgage has to pay more. 1.5 trillion in household debt is a very bad sign what means the rich are still going richer.Noboby understands that poverty cost society billions of tax payers money, creates all kind of illnesses, broken relation ships,crimes and so many more costly things. Interest rates of over 23 percent are in my view criminal and creates a lot of missery,but big money are filling up their pockets. I was born at the time we were living in a democratic situation but will die onder corporate dictator ship. But our country has still beautiful places to hide, but not sure for how long!

    • Justin Thyme 3 years ago

      Interest should be illegal?

      Only in countries under Muslim/Islamic law.

      Charging interest on money is completely illegal under Islamic law.

      Yet even in Muslim countries, they have found a way to charge for mortgages.

      You see, who would ever lend thousands of dollars if their was no return? the lender would only see their funds loose value due to inflation while the buyers’ assets increase in value.

      As long as there is inflation, there will be interest.

      As long as people demand to be paid more for the same work or product, there will always be inflation.

      The desire to ‘get ahead’ is, I am afraid, innate in humans.

      There will always be interest.

Comments are closed.