Total household credit liabilities increased for the third straight month, statistics agency says
Canadian household debt reached a new record high of nearly $2.9 trillion in May, according to the national statistics agency.
Household credit liabilities, including mortgage and non-mortgage debt, totalled $2.858 trillion during that month. This represented a 0.2% increase for the third straight month, Statistics Canada reported.
Mortgage debt and home equity lines of credit accounted for the bulk of the sum, with a 0.1% uptick to reach a little over $2.291 trillion in May.
However, “on an annualized basis, household mortgage debt rose 2.0% in May, the slowest pace of growth since December 2011,” StatCan said.
“Total existing home sales rose for the fourth consecutive month in May 2023, with sales volumes growing 4.6% and the average sale price increasing 2.7% to roughly $714,000,” the agency added. “The average sale price in May represented 90.2% of the peak posted in February 2022.”
By most indications, the current risk of recession is elevated, with TD Economics anticipating a “sizeable” slowdown in consumer spending and job losses in the US and Canada, coupled with an extended period of sub-trend economic growth.https://t.co/EY0dbSgKT6
— Canadian Mortgage Professional Magazine (@CMPmagazine) March 10, 2023
Personal loans drove growth in non-mortgage borrowing
Non-mortgage loan debt went up by 0.4% (amounting to $2.7 billion) in May.
“In contrast with previous months, the higher growth of non-mortgage loan debt was not attributable to credit card debt with chartered banks, which increased 1.1% in May, down from an increase of 1.5% in April,” StatCan said.
“Rather, the acceleration in non-mortgage loan debt in May was driven by personal loan plans (+0.7% in May, up from +0.4% in April) and other personal loans (+0.8%, up from -0.4% in April).”
Taking into account the 50-basis-point increase in the policy interest rate from May to July, the trend might lead to further pressure for Canadian households scrambling to accommodate their spending, StatCan warned.
“Annual growth in non-mortgage debt in the first quarter of 2023 continued to be strongest for the lowest 40% of wealth holders (+4.6%) and for those aged 35 to 44 years (+3.3%),” StatCan said.
