Uh Oh! Canadian Credit Growth Falls To Lowest Levels Since 199… Nope, 1983

Rising interest rates are already drying up credit for Canadian households. Bank of Canada (BoC) numbers show household credit hit another all-time high in August. More concerning is the rising balance is seeing a rapid decline in growth. Rising rates have sent the annual pace of growth to the lowest it’s been over 35 years.

Canadians Owe Over $2.145 Trillion In Debt

Even with slowing growth, Canadians were able to squeeze out a new record for household debt. The balance of household debt at large lenders reached $2.145 trillion in August, up $.7.528 billion from the month before. The annual pace of growth works out to 3.72%, which is actually the slowest it’s been since 1983. That’s all kinds of impressive when you realize that interest rates were over 5x higher in 1983. Let’s break this down.

Canadian In Household Debt Outstanding Change

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

Source: Bank of Canada, Better Dwelling.

Canadians Have $1.52 Trillion In Residential Mortgage Debt

Outstanding mortgage credit reached a new high, but growth is tapering fast. Outstanding mortgage credit hit $1.52 trillion in August, up $4.22 billion from the month before. That brought the annual pace of growth to 3.61%, falling to the lowest levels since June 2001. It’s worth taking a quick dive through our mortgage breakdown to see what was happening in 2001.

Canadian Household Debt Outstanding

Total debt held by Canadian households, in Canadian dollars.

Source: Bank of Canada, Better Dwelling.

Canadians Add Another $3.304 Billion In Consumer Credit

Consumer credit reached a new record, and actually a small acceleration in growth. The outstanding balance reached $618.32 billion in August, up $3.30 billion from the month before. The annual pace of growth hit 4%, a touch higher than the same time last month.

Canadian Household Debt Change

Annual percent change in debt held by Canadian households.

Source: Bank of Canada, Better Dwelling.

The pace of household credit growth is falling to levels Canada doesn’t have a lot of experience with. On the surface, it seems great since everyone is being told debt is bad. However, in credit driven economies, this is a sign that economic growth will slow. Slowing credit growth and rising rates are often seen in the later stages of the credit cycle.

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  • Faisal 6 years ago

    I’ve been saying this a lot recently, but this doesn’t resemble the 1990s, it resembles the 1980s recession. We’re seeing further divergence from the US, and deterioration of our leading indicators. I’m not fear mongering, and think it’s going to be the end of the world. Canada did just fine after the double 80s recessions. It just won’t be as easy as it was during the Great Recession.

    • Wen-Lee 6 years ago

      One problem with that. In the 1980s, Canadians started to buy houses everywhere to protect themselves from inflation. Today, they already have the houses. A lot of people have several of them. 😂

    • neo 6 years ago


      I don’t agree at all. The 80’s saw rapid wage inflation that stoked interest rates higher. Real wage growth has been flat in Canada for decades now and household debt levels are sky high compared to the 80’s. In the 80’s Canadians were still savers and had a high savings rate while today is the exact opposite. We also had a huge manufacturing sector and a more diversified economy Households couldn’t be more ill-prepared for a recession or higher interest rates.

  • Kevin G 6 years ago

    Not a big deal. Debt will rise again as we raise our immigration targets and start to cut interest rates.

    • Ken Zhao 6 years ago

      There seems to be a disconnect between what everyone thinks immigrants do. If you bring them from countries that are doing better than Canada, you get Vancouver. It’s not fun in Vancouver when your limited to local incomes, and have to compete with wealthy astronaut families.

      • Chris 6 years ago

        Right? People are mad about Nigerian/Salvadorian/Haitian refugees? Naw. Struggling people who want a better life? Those were my ancestors 60 years ago. They’re cool with me. It’s the Chinese/Russian/Gulfie hot money that needs to be pushed out.

  • Alan 6 years ago

    To da moon! Second half recovery of real estate sales will push that right up again. As long as people can money launder in Canada, and we have lax controls, magic amounts of debt will continue to rise.

    • Ian 6 years ago

      You know that second half recovery isn’t what people are reporting, right? Last year was one of the worst years in decades for sales. We’re beating that, and printing the second worst year in decades.

  • Every Real Estate Agent In 2020 6 years ago

    “Everything is fine. That sweating I’m doing is totally normal. Oh, don’t mind the guy repo-ing my car outside, it happens.”

  • Tibor 6 years ago

    Home prices are rising. Wage growth is outpacing inflation again. Once people settle into this being the new normal, they’ll start to jump back into the market. It’s very different from the 1980s.

    • Raging Ranter 6 years ago

      Wage gains have been miniscule and have now slipped beneath inflation. Home prices were flat in September according to the new Teranet report released today. OSFI just announced their intention to seriously crack down on equity lending. And interest rates… are going up. People will be adapting to a new normal alright. But that won’t involve jumping back into the market.

  • Huang 6 years ago

    I knew I should have gone into insolvency consultation. That’s going to be a big segment to bet on. No public debt collectors, are there?

    • KMoney 6 years ago

      Is it too late to become a lambo repo expert?

  • Im Therious 6 years ago

    Can you guys do a comparison with Japan and their 80s/90s property bubble?

    It would be interesting to see the analogies, and if we are in for a decade or two of stagnation…

    • Enough of this 6 years ago

      Agreed! Comparison would be highly informative. As years have gone by, the Japanese buildup and crash appears to be the most relevant to the Canadian cycle witnessed thus far. Statement is purely anecdotal. Would love a concrete analysis made public

      Great work BD!

    • Raging Ranter 6 years ago

      Here is one interesting comparison. Total private debt (household plus corporate) in Japan in 1990 at the peak of their bubble was 213% of GDP. Today in Canada it is 216%. Make of that what you will.

      • Tokyo Drift 6 years ago

        It would be something else to see Japanese-style monetary policy hit Canada for 30 years. We hear of Tokyo as a futuristic wonderland, but if you’ve actually lived there, you’ll notice that there’s tons of empty houses because no one wants the hassle and debt. The government there had to pass a law that says they can start seizing them if the owner can’t be reasonably found.

        30 years later, their home prices are about the same today.

  • SUMSKILLZ 6 years ago

    You can’t even plant a vegetable garden this time around. Damn raccoons will eat everything. Can’t heat your home with firewood either….most homes don’t have fire places. Well, that is what I recall from the early 80’s. 1983 was a dark time in my life. Hope everyone’s wrong on 2020 predictions. I would not want my son to experience that darkness.

    • Micheal Prado 6 years ago

      I heard someone on TV say if there was a NAZI uprising in the near future, it wouldn’t be exactly like the 40s. There would be social media, it would be glamorized, there would be apps, and monetized outrage. That’s how a 1980s style recession would be. The horrible things in the 1980s, but with a slick tech and reality wash over it.

      • Trader Jim 6 years ago

        So what you’re saying is instead of having to rent part of your house out, there would be an app for that like AirBnB?

        Instead of doing random deliveries to keep your vehicle, there would be an app like Uber?

        Instead of roaming from job site to job site, there would be an app like Freelancer?

      • SUMSKILLZ 6 years ago

        Agreed. Emotions would be way higher today than 1982. Folks would be instagramming pics of their empty pantries and unplanned weight loss…gofundme’g emergency dental work…blogs would write about multifamily/dwelling internet router sharing. The guilt shaming would be endless.

    • Cassius King 6 years ago

      Yes, this time around the real problem is the raccoons. In the 80s, big hair and leg warmers posed the greatest threat to our national security. Dark daysindeed..

  • Contrarian 6 years ago

    How about a chart which includes the same statistics as above with residential real estate prices, rate of inflation, and interest rates? That would provide the missing information to the incomplete picture presented.

  • GeezLouise 6 years ago

    You guys are hilarious. Total debt too high = OMG that’s bad. And then, oh, the debt’s growing slower than it has for decades = OMG that’s bad too! So what is it guys – you can’t diss both high debt *and* slowing debt growth.

    • TKO 6 years ago

      It may be a little too complicated for someone like you, but credit growth is finite to the expansion and contraction cycles. If the BOC let it get too large, they require a massive contraction to fix it, or run into uncontrolled inflation. The contraction begins by, I know you’re slow but I think you can figure this one out…. nothing? The contraction begins when growth starts to slow.

      This isn’t for you schmucks that own a home. It’s credit controls, which impacts the broader economy, which later impacts home prices.

      • GeezLouise 6 years ago

        Not every overvaluation needs a capitulate to correct. Slowing debt growth can allow the underlying economics (income) to ‘catch up’ to overall debt levels. It’s what’s called a soft-landing. But I guess the idea of flattening debt and economic growth without an actual full-blown recession is perhaps a little too complicated for someone like you to grasp?

        Nobody knows what’ll happen – all I’m saying is that we should consider that slowing debt growth can be a positive sign. Just like slowing real estate valuations. They don’t mean we’re going off a cliff when we reach the top of the hill – it could just be a plateau.

        • Grizzly Gus 6 years ago

          That was a good spin Geez. You must be a real estate agent.

          Your point was that you can’t call out high debt, and then call out slowing debt growth at the same time. As if these two things can not be related.

          You could have argued that slow growth is a sign that things are back to “balanced” (RE buzz word of the year) but you didn’t.

          Sure it was a long stressful week for ya. Try to get some rest this weekend

        • Bluetheimpala 6 years ago

          Hmmm…I like you. Here’s a bet. I bet that given an entire weekend you cannot find a SINGLE credible source to suggest wages are appreciating at a consistent level that within 10 years, assuming ZERO growth but also no depreciation in RE prices, consumers in GVA and GTA will be able to afford a 20% down plus the monthly and all other costs….ok, I’m kidding, we know the answer because BD basically posted this last year. I think it was 15+ for GTA and like 20+ for the shit slurry out West and that was assuming some unrealistic saving rate. So you’re wrong. In terms of the thought , ‘nobody knows what’ll happen’ I guess that is true with everything…I could jump off a 10 story building and live or I could buy a lottery ticket and hit bank. I can’t say it will happen today or tomorrow or next month but within 6-12 months, I can assure you we will not be in a better place than we are today. Tick tock. BD4L.

        • @xelan_gta 6 years ago

          GeezLouise, Bluetheimpala is correct here, you will need 15-20 years for the fundamentals to catch up and at the same time prices must stay exactly where they are today.

          But if you still think it’s doable think again because construction costs must be frozen as well along with construction workers’ wages for the next 15-20 years and existing RE investors should stay in the market be also OK to accept 0% appreciation (or in other words 30% property value loss due to inflation.)

          There are much more conditions which must be met in order for “soft landing” to work but even those ones enough to understand that “soft landing” is just a fancy political term.

      • Bluetheimpala 6 years ago

        Here is an example that is relatively simple to understand; love. I love my hamster and he loves the pants I make for him (sequin onesy a la Elton, its friday!) and he loves me. He hops into my hand I pet him, tickle his nose and put pants on him. It was gradual and constant growth and now we’ve reached peak love over the course of 10 months. Like 10 loves a month for a total of 100 love. Now if we’d attempted full love right off the bat it would’ve ended up with a lot of hamster urine, small bite sized wounds and a dead hamster. My point? Rates go up and down. Assets go down and up. the issue is not binary up = bad, down = good. Adapting to new climates is natural but having credit GROWTH drop below the 10 year average all because mortgages increased by 1% point is fucking weird bro. My parents borrowed in the 80s at over 10% but credit growth was going gang busters. Think about that. A bubble imploding is often highlighted by a normalization in some underlying factor and instead of returning to the previous levels all hell breaks loose as the inefficiencies, bad money which tends to get leveraged (think CLOs) bubbles up as underlying asset values drop. Annyywhooo…I love hamster pants. Tick tock. BD4L.

    • Grizzly Gus 6 years ago

      After a huge good ole fashioned household debt orgy, what do you think one of the earliest warning signs is that it’s starting to roll over?

  • CJRay 6 years ago

    Hey Kevin G & Tibor;

    You guys crack me up. I love your dry sense of humor!

  • Tick Tock 6 years ago

    Uh oh! The crash will come tomorrow…but there is always a new tomorrow when tomorrow comes. 😉

  • Skylar 6 years ago

    Great comments today, 10/10.

Comments are closed.