Canadian mortgage debt is finally returning to normal just a year after rates began climbing. Bank of Canada (BoC) data shows households continued to slow down on the mortgage credit borrowing in March 2023. The growth rate has now returned to levels more typical of the 2010s—back when people thought they knew what a frothy real estate market looked like.
Canadians Owe $2.1 Trillion In Mortgage Debt
Canadian mortgage credit is returning to healthier and more typical levels. Households pushed the outstanding balance 0.2% (+$3.8 billion) higher, pushing the total to a whopping $2.1 trillion in March. While the total is astronomical, March’s growth came in at a third of the rate seen last year, and a quarter of the rate in 2021. It was an unusually slow March—the slowest since 2018.
Canadian Mortgage Debt Hits A New Record High
The outstanding balance of Canadian residential mortgage credit owed to institutions.
Source: Bank of Canada; Better Dwelling.
Canadian Mortgage Debt Sees Growth Slow To Early 2020-Levels
March was a part of a broad trend of slowing mortgage borrowing. The balance is 5.4% (+$108.2 billion) larger than the same month last year, which is still a substantial amount of growth. Especially with a balance as large as we’re seeing. However, the annual growth rate is still the lowest since January 2020, and returned to pre-March 2020 levels for the first time since rates were first cut.
Canadian Mortgage Debt Growth
The annual growth rate of Canadian residential mortgage credit.
Source: Statistics Canada; Better Dwelling.
Higher Interest Rates & Fewer Sales Are Dragging Growth
The mortgage growth deceleration trend is driven primarily by higher interest rates and a low volume of sales. Higher interest rates intentionally slow activity to moderate price inflation, and they’re definitely slowing credit demand. Falling fixed rate mortgages are working against the trend currently, but in general there’s a drag on mortgage debt growth.
Home sales are also working against mortgage credit growth. Despite showing some improvements over the past year, home sales remain relatively slow in contrast to historical volumes. Improving from last year isn’t quite the same as a normal market, which is yet another drag on mortgage credit.
Canadian mortgage credit growth is slowing, but slowing doesn’t mean slow. It’s a level of growth that would have been considered strong prior to 2020, a period not exactly known for a real estate slump in Canada.