Mortgage debt is growing at its slowest pace in 23 years — but that could be short-lived, says CMHC
Higher home sales and prices forecast in the coming years
Mortgage debt grew at its slowest pace in 23 years in February, amid high borrowing costs and reservations related to the Bank of Canada's key interest rate — but the slowdown likely won't last, according to Canada's housing agency.
Canadian mortgage debt totalled $2.16 trillion that month, up 3.4 per cent from the same period last year — a historically low growth rate, according to a report from Canadian Mortgage and Housing Corporation (CMHC).
High interest rates and uncertainty over the central bank's plan to lower its key interest rate led to fewer home sales and softer prices across many regions.
Tu Nguyen, an economist with RSM Canada, says it's not surprising that housing market activity has slowed down.
"Households are really being squeezed by high inflation and high interest rates. It's also a waiting game, as prospective homebuyers are waiting on the sideline for the Bank of Canada to cut rates," she told CBC News.
However, she agrees with the agency's expectation that the slowdown in mortgage growth could be short-lived, with higher home sales and prices forecast in the coming years.
"Once the Bank of Canada begins cutting rates, which is as early as next week, we will see mortgages growing again," she said. The Bank of Canada's next interest rate announcement is on June 5.
According to the CMHC's report, that anticipated decline in mortgage rates, along with population growth and increases in disposable income after tax and inflation, will likely fuel the turnaround.
"In a context where debt levels have never been so elevated and households are showing increasing warning signs of financial struggle, household debt vulnerability is becoming a primary area of concern," said CMHC deputy chief economist Tania Bourassa-Ochoa in a news release.
"As homeowners find it more difficult to manage their monthly budgets, policymakers and the financial sector are on high alert when considering risks to the financial industry and the economy."
'Noteworthy increases'
The report also said borrowers are continuing to opt for shorter-term, fixed-rate mortgages over traditional five-year fixed terms as they remain uncertain of the short- and medium-term mortgage rate outlook.
That's despite "noteworthy increases" in the discounts being offered by lenders on five-year, fixed-rate mortgages in the first two months of this year, which marked a reversal of the trend from the last half of 2023.
A
for-sale sign is posted outside a Toronto home in March 2022. The
national mortgage delinquency rate hit 0.17 per cent in the fourth
quarter of last year, still near historic lows, but trending up for the
first time since the beginning of the pandemic, according to a report. (Evan Mitsui/CBC)
"Lenders are foreseeing potential rate cuts by the [Bank of Canada] occurring sooner than they anticipated last year and are seeking to lock in mortgages at relatively high rates," the report said.
Terms ranging from three years to less than five years remained the most popular choice, representing nearly 40 per cent of all lending for newly extended mortgages in February 2024. Variable-rate mortgages accounted for 15 per cent of all lending for newly extended mortgages.
The report showed the national mortgage delinquency rate hit 0.17 per cent in the fourth quarter of last year, still near historic lows, but trending up for the first time since the beginning of the pandemic.
Low delinquency rates don't necessarily mean that households are in a good spot financially, Nguyen said.
"People pay their mortgages first and foremost. So they pay their mortgages before they pay for anything else, like eating out or sports or vacations."
The report also noted the Big Six banks are taking an increasing share of the market for extended mortgages.
In the fourth quarter of 2023, those banks' share grew 11.8 percentage points from last year, driven by increases in refinances and renewals. Other chartered banks and credit unions recorded decreases of 6.9 and 3.1 percentage points, respectively.
ABOUT THE AUTHOR
With files from The Canadian Press
"In a context where debt levels have never been so elevated and households are showing increasing warning signs of financial struggle, household debt vulnerability is becoming a primary area of concern," said CMHC deputy chief economist Tania Bourassa-Ochoa in a news release.
"As homeowners find it more difficult to manage their monthly budgets, policymakers and the financial sector are on high alert when considering risks to the financial industry and the economy."
"Mortgage debt grew at its slowest pace in 23 years"
I'm curious if HELOC debt is a part of this figure.
Reply by Greg Anderson.
YEP. People partying off the equity. Until it time to PAY it back.
Comment by Bogdan Krystek.
Mortgage debt is at an all time high!! There it can’t go up much more based on people’s income levels…what is the point of this article?
“Organization for Economic Co-operation and Development. Housing as a double-edged sword: Based on the latest data across G7 countries, Canada has the highest level of household debt to disposable income, reaching over 180%, compared with about 100% in the United States and Germany.”
Reply by Adam Smith.
The government can and is allowed extending the terms of payment like 30-yr mortgages.
Reply by Bogdan Krystek.
Going from 25 to 30 years doesn’t make that much difference when your interest rate is double or triple what it was…interest rates won’t be coming down much…we are dependent on US rates.
Reply by Adam Smith.
Yes, that is due to poor economic competitiveness of the Canadian economy. Therefore 73c exchange rate or lower must be maintained to keep the game going. It is a sad state of affairs.
Comment by peter clause.
It’s funny and yea it will be short lived. Once interest start dropping, price of houses etc will climb. Folks are waiting to see. It’s sad when I was reading an article saying that young ones for most part will be wating from mom/dad etc money for a down payment.
Reply by Bogdan Krystek.
Interest rates won’t be dropping much…it will still be much more expensive to carry a home…home prices will come down when no one can afford to finance the high debt levels.
Comment by Tony Johnson.
It seems like the expectation is that once rates go down they'll stay down. That doesn't really match any past precedent. There is also the matter of our big ugly sibling to south delaying rate cuts.
Comment by Adam Smith.
"Slowest in twenty years" is not saying much as this was a period of reckless rapid expansion in money supply (bailing out the financiers) that got us into the current cost of living crisis.
Comment by Fred Bear.
Mortgage debt down, our economy down the toilet. The two go hand in hand. Our economy is built on debt.
Reply by Craig McMaster.
Just think - our last government was worse as we went through 2 recessions, record high debt, and record high unemployment...
Huh - Poilievre was a part of that government.
Comment by Luc Newsome.
Three likely reasons
Waiting for the government to build affordable housing?
Waiting for bank of mom and dad to provide cash?
Waiting for interest rates to drop?
Reply by Holley Hardin.
Why would the government build housing?...this isn't Russia...
Reply by David Amos.
What is your point?
Hidden comment.
Reply by Holley Hardin.
Keeps losing to Alberta....
Reply by Gordon MacFarlane.
Because he is angry all the time.
He doesn't really even like his own party but he had a profile amongst the crowd JT longs to be loved by so he was brought in as a centerpiece to show how much the govt cares.
Now part of the govt he realizes it was not true and he has been used as a prop
Comment by Ian Malcomson.
If you want to build affordable housing, reduce the redtape and waiting time to get the requisite building permits.
Reply by Holley Hardin.
Bingo....and reduce taxes on construction material...ie...carbon tax on concrete...virtually eve home uses tons upon tons of concrete...
Reply by Richard Bend.
What is this "red tape" you speak of? Every time I've heard someone complain about this, it turns out they were trying to do something no one should really do.
Reply by Richard Bend.
Why not go further and make all forms of waste collection free - no sewer fee, no garbage pick-up fee?
Reply by michael hatch.
I was in the business for forty years, there's no red tape that prevents housing. There's only whether it makes a profit. No profit, no build!......duh
The City, the Province and the Federal government stopped building housing forty years ago.
Reply by Adam Smith.
CMHC went from building, running housing to being a backstop for big banks.
Reply by michael hatch.
Banks do what banks do, it has nothing to do with the housing shortage. Governments decided to get out of the housing business with a result we have a housing shortage at all income levels. Most of those were Conservative Governments but we can also thank Paul Martin for persuading Chretien to be a small "c" Conservative. Which is why he failed miserably as a PM.
Comment by Greg Anderson.
Holding out for that .5
Rates will not be low forever.
Pay down your mortgages people. You don't need a 4th or 5th t.v.
Or 3 vacations a year.
Comment by Holley Hardin.
$ down again today...it is the only way to pay off JT's debt....make the dollar worthless...
Reply by David Amos.
So you say
Hidden comment.
Reply by Darren MacDonald.
"For the price of a two-bedroom house in Kitchener, Ontario listed at $1.8M people can buy a lake-facing Swedish castle."
Reply by Henry Hill.
Don’t mention that the house is over 5200 sqare feet. It makes your point more dramatic
Reply by michael hatch.
Yeah sure show us the listing.......
Reply by Darren MacDonald.
Would you prefer a property price index? It's available for Europe, USA or any country to your liking.
Reply by Darren MacDonald.
I'll also add, dated November 2022 "Canada currently has the most expensive housing market among the G7 nations, according to data from the Organisation for Economic Co-operation and Development."
Comment by Henry Hill.
Mortgage debt is secured debt though. So no issues
Reply by Adam Smith.
Secured only to the extend to the quantity and quality of the collateral.
Comment by Paul Hogan.
Surely it must be a mistake that they left the ability to discuss this open???
Reply by Holley Hardin.
6pm eastern...some one went home and forgot to shut things down...
Reply by Holley Hardin.
Good grief what am I saying...they went home 4 hours ago...
Reply by Eric Red.
I thought they all worked from home these days.
Reply by David Amos.
Who cares?
Comment by michael hatch.
In 1992 the Federal government stopped building subsidised housing (thanks Brian), the Province stopped in 1995 (thanks Mikey), the City of Toronto stopped at the same time (thanks June Rowlands).
But of course it's the builders and bankers fault because as we all know money grows in trees.
Reply by Holley Hardin.
Or you could just take some personal responsibility for your housing...that's a novel concept..
Reply by Rob Lehtisaari.
So, the Provinces are at fault, for the crisis, while you blame the PM, and people personally as scape goat.
How novel, of Holly to ignore the root of the problem for the larger problem that goes higher than any one persons responsibility, it lay in the office that holds the domain of power on housing, which is Provincial now, because the Conservatives made it so. (Brian Mulroney, as PM)
Reply by David Amos.
Who are you to tell people what to do?
Reply by michael hatch.
That is simply nonsense.
Comment by Thanh Lefebvre.
Since 2015 that guy's economics has decimated Canadians dreams of home ownership.
Reply by Aaron Archer.
It's an absolute shame what has been done. All by design too.
Reply by Holley Hardin.
Lots of other dreams quashed as well....
Reply by Rob Lehtisaari.
Contrary to those pushing a public campaign that the PM is a deity, the office can no more control Putin's War, or World Inflation from the affects of Covid, War, and an Oil Cartel price on Oil & Gas, or even the independent Fed, & Bank of Canada's Governor.
Reply by David Amos.
My MY You do tell some stories
Reply by Craig McMaster.
Sure - because the federal government is responsible for every Canadian's personal finances...
Comment by Holley Hardin.
The current government is telling young Canadians and want to be Canadians that it's ok never to own a home....You will be happy to pay rent for the rest of your life...Your future will be handled by the Government...
Reply by Holley Hardin.
Well good until they tell you to be out at the end of the month...
Hidden reply.
Reply by Holley Hardin.
Well no one can tell me to be out at the end of the month...
Reply by Henry Hill.
Do nothing but work all your life, and leave it to someone else at the end?? No thanks
Reply by Adam Smith.
Sounds like a return to feudalism.
Reply by Darren MacDonald.
If you don't own a home and rent, life is going to more expensive.
Housing starts for the last couple of months have been down and immigration is surging.
The old supply and demand will hurt these youngsters even more for the foreseeable future.
Reply by Holley Hardin.
Work all my life?...I've been nicely retired quite some time now....
Reply by Rob Lehtisaari.
Holley Hardin, makes an allegation, but a simple ask of a credible source for such an outrageous claim substantiation, to be verified is the information that needs to be censored, over said disinformation.
I value time more than too waste on accuracy, where click bait is the aim, over such facts.
Holley, Provinces are the current Government that is failing on housing.
The Conservatives of Brian Mulroney gave up all those subsidies and policies to the Provinces, take up those current Governments as failing Canadians, rather than scape goating, as Pierre pretends, and will have no plan for if he reaches the office of PM.
Reply by Henry Hill.
Sitting around, afraid to spend any money. Again, no thanks
Reply by Henry Hill.
No interest in devoting my life to owning a home. You can if you want, not what I am spending my money on.
Reply by David Amos.
Brag much?
Reply by Craig McMaster.
It's the free-market that has driven up home prices.
And why are we in a housing crisis? Well, about 40 years ago we were convinced by conservatives that the Government shouldn't be in the housing business. It would be best left to the private sector. The private sector is far more efficient than government...
And so - with interest rates held artificially low for 15 years combined with a lagging private sector at building homes, home prices are at record highs along with mortgages.
What does Poilievre plan to do about it other than axe the tax??
Comment by Aaron Archer.
So how did homes become so unaffordable in the last 10 years? Canada's birth rate is 1.4, where did the demand come from? How did this happen?
Same question/ answer for over burdened health care.
Reply by Adam Smith.
Because Canadians voted for this. Oh wait, no, they voted for the opposite.
Reply by Rob Lehtisaari.
If one reads and absorbs the above article, one can read that inflation is the cause, not the political party in office.
This article is mostly concerned with Banks and their exposure to debt, personal mortgage debt.
Reply by Tony Johnson.
Nothing to do with laying the welcome mat out to any/all immigrants and changing rules for permanent residency.
Reply by Craig McMaster.
Holding interest rates at 0% for 15 years caused housing to become unaffordable...
Comment by Holley Hardin.
I think NY calls them the "Projects"....that what this current Federal government has in mind...
Reply by Rob Lehtisaari.
No, the 1940's and 1950's NY Projects public housing is not what the Federal Government is subsidizing, to fill in the holes that Provincial Governments are failing the people on, while blaming the Federal Government for...
Yet, Housing is a Provincial concern that these Provincial Governments have been failing on, most especially that housing that is owned by the Provinces themselves.
Here is an example of one Provincial Government's failing in the new's here:
Soaring social housing vacancy rates a Sask. Party failure, NDP says
Documents show there were 3,161 vacant units in Saskatchewan last year
Reply by Rob A Ross.
Wrong.
Reply by David Amos.
Ditto
Comment by Frank Brace.
Everything is affordable;le if your wages keep pace with costs . We all make financial decisions
Comment by Jenna Collins.
You won’t recognize this country when you know who is finished with it.
Reply by Rob Lehtisaari.
I believe Stephen Harper, said that !
Nov 20, 2015 — Stephen Harper once famously said, “You won't recognize Canada by the time I'm done with it.”
Comment by Frank Brace.
Cheap money , high debt and decisions made are catching up to some
Reply by Gregory Wulf.
The solution; earn more than you spend.
Reply by Holley Hardin.
Yes Canadians need to consider the party they vote for in Federal elections a little more carefully...
Reply by Holley Hardin.
Does that apply to governments as well?....
Reply by Gregory Wulf.
I wish that you could find me a federal party that would make that a priority.
Reply by Frank Brace.
I make my own financial decisions , both income and spending decisions. What politician makes them for you ?
Reply by Holley Hardin.
Well I think if you compare the last two governments spending habits you will find one markedly better than the other....
Reply by Frank Brace.
The want for immediate gratification and 99 easy payments for life have led many astray
Reply by Holley Hardin.
Hardly...your tax dollars (provided you pay any) are spent by the government...
Reply by Frank Brace.
Those are Govt decisions , and the more I made the more taxes i paid no matter who was in power - varied by province - , but the more I had left to do with as I please
Reply by Rob A Ross.
Yes Holley that’s how we fund government. Very good.
Reply by GeorgeW Biggs.
Sad how there’s no real accountability for the waste
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