Odd: Canadian Mortgage Credit Growth Is Rising, While Consumer Growth Falls

Canadian households are pushing mortgage growth higher, but not other types of debt. Bank of Canada (BoC) data shows the rate of growth for mortgage debt hit a high for the year in July. Meanwhile consumer credit continued to the lowest rate of growth seen in years. An unusual match, since both segments don’t typically diverge for long. Compared to last year, both segments are showing continued signs of decelerating growth.

Canadian Households Now Owe Over $2.21 Trillion In Debt

Canadian households hit a new record for debt held by institutions last month. The total balance of credit outstanding hit $2.22 trillion in July, adding $77.1 billion in the month. Compared to the same month last year, this represents a 3.6% increase. The dollar amount is a record high, but the rate of growth is telling us a somewhat mixed story.

Canadian Household Debt Outstanding, Percent Change

The annual percent change of total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

The rate of growth improved from earlier this year, but is still generally trending lower. The 3.6% 12-month increase is the same rate as the month before, and the highest since October 2018. To see another July this slow, we need to go back to 1983. Growth is higher than we’ve seen this year, but still abysmal by typical standards.

Over $1.58 Trillion of The Balance Is Mortgage Debt

Most of the debt Canadian households owe is on their residential mortgages. The outstanding balance of mortgage debt reached $1.58 trillion in July, adding $58 billion in the month. Compared to the same month last year, this represents an increase of 3.8%. The balance is once again at an all-time high, and growth is showing some near-term improvement.

Canadian Household Debt Outstanding In Dollars

Total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

The rate of growth is higher than it’s been recently, but is still showing deceleration from last year. This is the highest print since July 2018, a year ago. The rate of growth is -2.56% lower than it was during that past July though, and the lowest print for the month since 1995. The near-term acceleration may be obfuscating the view, but credit growth is slowing.

Canadian Households Owe Over $634 Billion In Consumer Credit

Canadian households owe a new record for consumer debt. Consumer debt topped $634 billion in July, adding $19.2 billion during the month. Compared to the same month last year, the balance is 3.1% higher. The total balance for the segment set a new record all-time high, but growth is dropping across the board.

Canadian Household Debt Change

Annual percent change in debt held by Canadian households.

Source: Bank of Canada, Better Dwelling.

The rate of growth for consumer debt is decelerating monthly and annually – which is not good. The 3.1% 12-month growth seen in July marks the third consecutive month the number has made a decline. The rate is now at the lowest level since March 2016, and the slowest July since 2014. Compared to last July, the rate is also 8.82% lower, meaning we’re seeing a faster slowdown than we are with mortgages. Odd, since consumer credit usually rises when the economy is improving, as it is now.

Credit growth is showing varying short-term pictures, but the same longer-term trend. Mortgage growth is showing acceleration compared to earlier this year. Consumer credit is showing decelerating growth compared to earlier this year. Both segments are showing declining growth compared to last. At least the longer-term picture is consistent.

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  • Kathleen Thomson 9 months ago

    Sign of speculation. When you buy a home, you pile on other types of debt to fill it with stuff. When you buy an investment, you don’t need anything else. There’s a reason why car financing jumps with home sales.

  • Li Gongfu 9 months ago

    If credit growth is falling across the board still, why are Canadian analysts so bullish on the interpretation? This is just a notch above your CPI, which isn’t exactly reflective of the 3.7% wage growth and 1% investment growth your government is talking about.

    • John Jay 9 months ago

      Li, we live in a debt fueled consumption economy. If they tell the truth, people will pull back from real estate which is the last driver of our economy. RE has surpassed oil & gas as well as the manufacturing sectors combined!

      Credit growth is happening even if the rate of growth is slowing. So let the party continue!

      Maybe we’ll get 0% rates again and a new wave of borrowing can lead us to prosperity ;/

  • FOMO 9 months ago

    Department Stores Credit Card Interest Rate = 20+++ % I think the Bay is 29%

    Mortgage or HELOC Interest Rates = sub 4%

  • SUMSKILLZ 9 months ago

    It feels like every nurse in my subdivision drives a Tesla….I’m not sure shift overtime makes the math work.

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