Canadians are doing something uncharacteristic — they’ve slowed borrowing mortgage debt. Bank of Canada (BoC) data shows a big slowdown in new funds advanced for residential mortgages for February. A small seasonal monthly climb was present, but even so it was an oddly slow month. The past couple months look more like the slowdown of early 2020 instead of the boom times recently seen.
New Mortgage Borrowing Dropped To Pre-Rate Cut Levels
Canadian mortgage borrowers are suddenly no longer in the mood for more mortgage debt. In February, lenders advanced just $35.6 billion in new loans, down 13.7% from last year. It was a small seasonal climb from January, but both months have been strangely slow. Fewer dollars haven’t been advanced for new mortgage debt since February 2020. Rates had yet to rise too, so it’s either buyer fatigue or rate hike anticipation. The BoC hadn’t done anything yet.
Canadian Total New Mortgage Lending
The total value of monthly new lending for mortgage debt, including new mortgages and refinancing.
Source: Bank of Canada; Better Dwelling.
Demand For New Uninsured Mortgage Debt Fell 7.5%
Breaking it down by uninsured and insured segments, both show sudden declines. In February, lenders advanced $30.0 billion for new uninsured mortgage loans, down 7.5% from last year. The seasonal monthly uptick was present, but the amount was still unusually low. New uninsured mortgage demand hasn’t been this weak since June 2020.
Canadian Total New Mortgage Lending
The total value of monthly new lending for insured and uninsured mortgage debt, including new mortgages and refinancing.
Source: Bank of Canada; Better Dwelling.
Insured Mortgage Demand Fell Off A Cliff — Down 36%
Insured mortgage demand has fallen off a cliff, with an unusually weak advance of funds. The dollar amount for the month fell to just $5.7 billion in February, down 36.2% from last year. Once again, a seasonal increase was observed month-to-month. However, excluding January, it was the smallest amount of insured funds advanced since 2017. As for January, it was the lowest demand for new insured mortgage funds since at least 2013. Regulatory data stops there, but the low likely goes much further back.
It’s important to remember the latest data is after the January warning from the BoC but before rate hikes. It wasn’t until March that interest rates climbed and the “super hike” only hit in April. In short, the credit throttling was primarily due to consumers, not monetary policy. People borrowed less due to buyer fatigue after the boom or in anticipation of rate hikes. The impact of higher interest rates will pile on top of this.
