CMHC released their Q4 2018 report on mortgage and consumer credit trends. Maintaining our Canadian culture, The average mortgage loan value reached $209,570, a 3.1% jump from last year. This allowed household debt to continue growing quicker than incomes, and pushed the debt to income ratio to a record high 178.5% in the fourth quarter.
However, on a more positive note, the average balance for new loans actually declined 3.8% year-over-year, which is most likely the result of the mortgage stress test. Any wonder the IMF released a report earlier this week suggesting, “The government is under pressure to ease macroprudential policy or introduce new initiatives that buttress housing activity. This would be ill-advised, as household debt remains high and a gradual slowdown in the housing market is desirable to reduce vulnerabilities.”
Mortgage delinquency rates remain stable, suggesting a gradual slowdown may be entirely possible. Although, as we are sometimes quick to forget, mortgage delinquency rates are very much a lagging indicator and are generally not a great barometer for forecasting the future health of Canadian household balance sheets.
There has been a substantial rise in the growth of the outstanding balance of non-mortgage debt, particularly in Vancouver. Existing mortgage holders in Vancouver saw non mortgage debt balances grow 11.5% year-over-year, suggesting households might be coming under pressure and are borrowing from lines of credit or credit cards to service existing debts.
This shouldn’t be overly surprising given the ability to refinance your home in Vancouver is becoming increasingly more difficult. Especially since homeowners lost an apparent $89 million in home value in 2018, at least according to an analysis commissioned by the anti-speculation tax and anti-school tax group ‘StepUp Now’.