Canada’s real estate slowdown is still trickling through the mortgage market. Bank of Canada (BoC) data shows mortgage originations continued to fall in January. The volume of new lending has virtually dropped off a cliff, as higher rates throttle leverage. Sky-high home prices that are falling aren’t exactly providing much buyer incentive either.
Canadian Mortgage Borrowing Has Been Unusually Slow
Canadian mortgage originations were unusually slow as higher rates bite into leverage. The value of new mortgage funds fell 16.1% ($4.0 billion) to $20.7 billion in January. It represents a massive 41.0% (-$26.6 billion) decline when compared to the same month last year. January is normally a relatively boring month, but this is far from a seasonal slowdown typically observed.
Canadian Mortgage Borrowers Are Pulling Back
The total monthly value of Canadian mortgage funds provided by lenders.
Source: Statistics Canada; Better Dwelling.
Mortgage Borrowing In Canada Dropped More Than 41%
Annual growth highlights just how abrupt this change over the past year has been. The -41.0% decline in January is the sharpest observed in the past 10 years of available lender data. Considering it was the slowest month since 2019, and the weakest January since 2015—it wouldn’t be hard to believe it was the slowest in a generation.
Canada’s Mortgage Originations Have Shown Unusually Slow Growth
Annual percent growth in the dollar value of Canadian mortgage funds provided by lenders.
Source: Statistics Canada; Better Dwelling.
When originations are this low a reversal on the horizon relatively soon is expected. An abrupt decline in purchasing without an impacted labor market tends to mean delayed buyers, not ones that have changed their mind. Without prices falling sharply from here or the labor market shifting, a bounce of some sort is expected.
