Despite the housing market recession, Canadians still have a serious addiction to mortgage debt. According to Stat Can, the sum of outstanding mortgage loans reached a new high in December of 2022. Even while the rate of increase in mortgage credit has fallen to its lowest point in years, it is still significantly higher than it was before 2020. With a GDP as large as Canada’s and expanding at a much quicker rate, it continues to be a cause for concern.
Total Canadian mortgage debt exceeds $2 trillion
The mortgage debt in Canada continued to grow by billions towards the end of last year. In December, the total amount due reached $2.08 trillion, an increase of 0.1%, or $3.0 billion. Compared to last year, this is a $137.8 billion (7.1%) rise. The fact that one-third of a very small population is responsible for so much debt is cause for alarm in and of itself. But the rate of expansion is slowing down.
When interest rates rise, mortgage borrowing in Canada slows dramatically
Mortgage credit is being slowed by slowing real estate sales and rising rates. In February of 2022, a month before the initial increase to the overnight rate, annual growth peaked. Every month since then has seen slowing, culminating in December’s reported rate of 7.1%. Since October of 2020, it has been declining at an ever-faster clip.
Mortgage Debt Continues to Outpace Productivity Despite Slower Growth
Please keep in mind that slowing down is not the same thing as being slow. The amount of mortgage credit that is currently outstanding continues to grow at an abnormally rapid clip. The rate in December was still 1.4 percentage points above the average for the five years preceding to 2020. Even though its size is comparable to GDP, its growth rate is substantially higher.
Increase in Mortgage Debt in Canada
Slowly but surely, rising interest rates are putting an end to Canada’s mortgage binge. But if mortgage lending expands faster than GDP, consumer spending would inevitably fall. In a nutshell, the unproductive financial economy is stifling the productive economy, which is terrible for long-term expansion