Canada

New Mortgage Lending Reached A New Multi-Year High For September

Canadian homeowners are busy borrowing once again, and more than they were before B-20. Bank of Canada (BoC) data shows mortgage funds borrowed were a lot higher in September. Growth of home sales across the country helped to push new mortgage funds lent to multi-year highs.

Canadian Mortgage Borrowing Up Over 41%

Canada’s residential mortgage borrowers took out a lot of cash from lenders. Borrows took $38.46 billion in September, down 10.21% from a month before. It works out to a massive 41.58% increase, compared to the same month last year. Last year was unusually slow, but even so – this is a huge increase.

Canadian New Mortgage Lending

The monthly dollar volume for residential mortgage funds advanced by institutional lenders.

Source: Bank of Canada, Better Dwelling.

The amount and rate of growth are some of the highest seen in recent history. This was the biggest dollar amount borrowed for a September, in at least 7 years. The 41.58% 12-month rate of growth is also the highest seen for September, over the same period as well. Only September 2015 comes close, but at 34.40% – even that huge growth looks small.  If you’ve been following this situation with us, you know a lot of this is likely delayed demand. Looking at it longer term, we still see big growth – just not outrageously large.

Canadian New Mortgage Lending Annual Change

The 12-month change in monthly dollar volume for residential mortgage funds advanced by institutional lenders.

Source: Bank of Canada, Better Dwelling.

Over The Past Year, Mortgage Borrowing Growth Is Up Over 6%

The 12-month simple moving average (SMA) of new mortgage funds borrowed, is tame in contrast. There was $32.22 billion taken out as a 12-month SMA in September, up 3.01% from a month before. This works out to a 6.34% increase, compared to the same period last year. This seems much lower, but it’s still substantial growth.

Canadian New Mortgage Lending – Moving Average

The 12-month simple moving average for monthly dollar volume on residential mortgage funds advanced by institutional lenders.

Source: Bank of Canada, Better Dwelling.

The rate of growth for the 12-month SMA is actually some of the highest in recent time. The 6.34% 12-month SMA increase is the second largest for September, in at least seven years. It’s also the highest monthly print for growth in any month, since December 2016. There’s also some redistribution making growth appear higher recently. Even factoring that though, there’s still quite a bit of growth injected into the market.

Canadian New Mortgage Lending – Moving Average Change

The 12-month simple moving average for monthly dollar volume on residential mortgage funds advanced by institutional lenders.

Source: Bank of Canada, Better Dwelling.

Mortgage borrowers are out in full force, after two years of stalling sales. The growth is now higher than before “cooling” measures were taken, as sales rise across Canada. One thing to note is that while this trend looks similar to the bump in 2016, insolvency growth wasn’t this high. Neither was the detachment from incomes to prices, even adjusting for cheap credit.

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4 Comments

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  • Matt 8 months ago

    Now, this is a bit of a pickle isn’t it. Since insolvencies usually don’t rise when home prices rise, it’s suppose to be the opposite.

  • Tom Wolfe 8 months ago

    Is it possible that the mortgage amount increase is occurring because homeowners are rolling their HELOC into the traditional mortgage on renewal? For example – a house valued $1.2M with a base mortgage of $700K and a maxed out HELOC of $200K renews with a mortgage of $900, no HELOC. This would improve the banks collection position if only to reduce legal costs.

  • straw walker 8 months ago

    Mortgage moving average change reached a high in the 2015/16 period which corresponds to Vancouver house prices reaching their peak.
    Is this new moving average high going to produce a new mini peak for house prices..??
    I guess spring prices will be the true test of what is the future ..

  • Investor 8 months ago

    CMHC said once that there are no exuberance in the RE market; so why worry? For those of us who have little to no faith in these regulators, we can attempt to exercise caution in all we do. Even that won’t mean we’ll all come out of this unscathed, but we can at least limit our exposure. My 2 cent.

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