DATE

canada mortgage

New Mortgages Across Canada Fall 6.5% in 2017

Steve Saretsky -

While it may sound hard to believe, it appears the Canadian credit binge is slowly winding down. Canada’s household debt which currently sits at the highest among the 35 developed and developing countries the OECD group monitors, has reached an unfathomable 101% of GDP.

It’s safe to assume any type of fall from the current sky-high levels won’t feel good. However, with the Bank of Canada raising interest rates, effectively tripling rates in less than a year, and regulators curtailing mortgage lending, we appear well on our way to a nasty stumble.

Per the Bank of Canada, year-over year growth and the 3 month annualized pace of mortgage credit growth is at its weakest pace of growth since early 2001.

Mortgage credit canada
Source: Bank of Canada

Recent mortgage data from CMHC also confirms mortgage credit and or the desire to borrow is in the dumps. Hence the sluggish and quickly evaporating liquidity in Canada’s housing market.

In 2017, there were 959,074 new mortgage loans, a 6.5% decline across the nation. The slowdown was exacerbated in Vancouver where new loans collapsed by 18%. In Toronto new loans declined by 9.2%.

Loan growth Canada
Loan Growth across Canada in 2017.

Across Canada, the number of refinances, mortgage renewals with a new lender, repeat buyers, and new owners all declined. The only category to increase was multiple mortgage holders.

CMHC mortgage changes
Source: CMHC

Mortgage refinances, which are often used to extract equity from one’s home, declined by 8.3% in 2017. In Vancouver they plunged 18.1%, and Toronto by 8.9%. This suggests homeowners lost some desire to leverage their property. Refinances were previously a popular option if a homeowner wanted to leverage an existing property for a downpayment on a second property.

Mortgage refinance growth Canada
Refinance growth in 2017 across Canada

Renewals with a new lender also plunged steeply. This is indicative of new mortgage changes which require borrowers to undergo a stress test when switching lenders. This suggests borrowers are staying put with their current lenders. In Vancouver and Toronto, decreases in this category were larger than average, at 33.3% and 25.7%, respectively.

While CMHC data covers approximately 85% of the mortgage market, it should be noted that this doesn’t include Canada’s booming private mortgage market which would surely increase the number of new owners, repeat buyers, and multiple mortgage holders. The private mortgage space is ultimately the end of the road for Canadian households.

 

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022