According to a new report by Canada Mortgage and Housing Corp., residential mortgage debt climbed last year at the quickest pace since 2008.
Mortgage debt increased by 9% last year, and by 10% in the first few months of this year before rising interest rates began to dampen the market, according to the Federal Housing Administration. "Family investments are rather high. Therefore, it's a potential weak spot, "said CMHC senior economist and report co-author Tania Bourassa-Ochoa.
There was a 43% increase in new mortgage originations and a 22% increase in refinances from 2020 to 2021, resulting in an increase of $400 billion in residential mortgages held by banks and a rise of $54 billion by credit unions.
However, as central banks have raised interest rates in recent months to control inflation, real estate activity has slowed significantly. On Tuesday, the Real Estate Board of Greater Vancouver reported a drop of 35% in regional house sales compared to the previous June, while on Wednesday, the Toronto Regional Real Estate Board reported a drop of 41%.
CMHC reports that when the discount on interest rates grew last year, borrowers favoured variable rate mortgages, which jumped from 34% to 53% of the overall mortgage market during the second half of the year.
Since more people now have mortgages with adjustable rates, higher interest rates will affect them more acutely when it comes time to renew their loans.
"Canadians who took out a new mortgage with variable interest rates will be the ones to experience that hike most, and most quickly," said Bourassa-Ochoa.
Mortgage defaults decreased across the board last year, indicating that borrowers were able to meet their financial obligations. This was due in large part to rising savings rates and a strong property market.
Indigenous, Black, Arab, and Latino populations were found to have significantly lower homeownership rates than the national average as of the 2016 census, the most recent data available at the time the article was written.
Homeownership rates were just under 50% across the board, with white and Chinese populations having somewhat higher rates than the national average (74% vs. 76%, respectively).
Even after accounting for factors such as race, age, education, and income, the analysis found that Indigenous, Black, Latinx, Arab, and Filipino Canadians continue to have lower average property values than other Canadians. This disparity has grown since the 2006 census. It stated that huge disparities in home wealth between demographic groups are an indication that inequality would remain since housing wealth is a powerful determinant of future generations' economic success.
