credit and debt
CANADIANS’ MORTGAGE DEBT ACCUMULATION CONTINUES TO SLOW Growth in total and average outstanding mortgage debt in Canada has slowed markedly in the past year; that’s probably a good thing.
In addition to aggregate debt increasing in Canada, outstanding mortgage debt has been growing, albeit at a slowing pace; we have recently-increasing interest rates, the mortgage stress test, and home purchase trepidation, among other things, to thank for that. In Q4 2018, total outstanding mortgage debt, at $1.54 trillion, was up only 1.4% from the previous year, compared to consecutive increases of 6.2%, 6.0%, and 6.3% in the preceding three years. This change has in part been driven by a slowing rate of increase in the number of active mortgages: the 1.9% growth over the past year, and 1.6% in the previous year, were both significantly below the 3.9% and 2.8% increases experienced between 2014-15 and 2015-16, respectively. Additionally, the average outstanding balance per mortgage has been rising more slowly, at 3.1% annually most recently, compared
to 4.1%, 4.4%, and 3.9% over each of the previous three years. Running counter to these trends is rising borrowing costs, which became a thing starting in the middle of 2017 and prevailed through the end of 2018, have increased more rapidly more recently, at 4.4% over the past year. This compared to an average of 2.4% over the prior three years, with the monthly average mortgage payment made by Canadians equalling $1,289 by the end of 2018. For now, rising wages have helped to keep rising mortgage payments manageable. The risk going forward is that wage growth moderates and rates begin to rise again after falling for the past 8 months. While this is unlikely for now, it is a trend that will continue to be monitored by the Bank of Canada.
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