REAL ESTATE
Canadian mortgage debt approaches $2 trillion
A
by Carlito Pablo
new Statistics Canada report shows how much debt Canadian households owe. Overall, households are on the hook for $2.694 trillion as of March 2022. That’s 0.5 percent, or $14.4 billion, more debt compared to February of this year. Statistics Canada reported that realestate secured debt, which is composed of mortgage debt and home-equity lines of credit, increased to $2.156 trillion in March this year. This represents a 0.6 percent monthover-month increase of $13.2 billion compared to February 2022. In particular, household mortgage debt increased 0.6 percent in March to reach $1.989 trillion. That level marks a $12.7 billion increase from February 2022. Mortgage debt increased 10.5 percent on a year-over-year basis, Statistics Canada noted. The May 20 report noted that the Bank of Canada raised its interest-setting rate in March 2022 to 0.5 percent, and again in April to one percent. The hikes have “impact on borrowing costs, especially those tied to variablerate loan products”. The central bank is
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expected to continue increasing its rate through the remainder of 2022 and into 2023 in order to tame inflation. Statistics Canada explained that household borrowing takes two forms: nonmortgage loans, which are “funds principally for consumption”, and mortgage loans, which represent “debt acquired to finance the purchase of a property”. Speaking of non-mortgage loan, this particular debt grew $1.7 billion, or 0.2 percent, month-over-month in March 2022, to $704.5 billion.
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Home equity lines of credit rose 0.3 percent, or $510 million, to reach $167.3 billion. Meanwhile, credit card debt with chartered banks increased 0.9 percent, or $727 million, in March. The information about ballooning debt levels came after the Canadian Real Estate Association reported recently that home sales in April 2022 had dropped by 12.6 percent compared to March. More importantly, CREA noted that the “decline placed monthly activity at the lowest level since the summer of 2020”. Real estate prices are also trending down. The home price index for all types of homes fell 0.6 percent month-overmonth in April. CREA stated that the drop was the “first month-over-month decline since April 2020”.
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“Following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue,” association chair Jill Oudil stated in the May 16 report. The sales decline follows the increase in mortgage rates. The drop in both sales and prices indicates that the Canadian housing market is settling down to its traditional level. The market set new records in 2021 and 2020 as the COVID-19 pandemic made housing a priority for many. In its new report, CREA noted that the number of transactions in April 2022 “came in 25.7% below the record for that month set last year”. “That said, as has been the case since last summer, it was still the third-highest April sales figure ever, behind 2021 and 2016,” the association noted. The same trend can be said about of the home price index, a measure that is different from either average or median price. CREA reported that although the index dropped 0.6 percent month-overmonth in April 2022, the gauge was “still up 23.8% year-over-year”. g
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