Canadians remain afloat, for now

While outstanding consumer debt continues its staggering ascent, the diminution in delinquency rates may help some rest easy.

However, according to CMHC’s Mortgage and Consumer Credit Trends National Report for Q3 2017, that also coincides with a drop in mortgage originations.

“Credit, overall, has increased, but at a slower rate than the previous year,” said Tania Bourassa-Ochoa, a senior economic researcher with CMHC. “In terms of outstanding mortgage credit, it has also increased, but at a slower rate than one year earlier. We see that the number of mortgages originated has decreased compared to one year earlier.”

The mortgage delinquency rate—debt is considered delinquent if it hasn’t been paid in 90 or more days—has been steadily dropping, too, and non-mortgage lines of credit also hit a 10-year low. In fact, Bourassa-Ochoa says mortgage arrears have tapered significantly.

But outstanding consumer credit is growing, albeit at a slower pace during Q3 of 2017—it was 5.5%—than a year earlier, when it was 7.4%. Outstanding mortgage balances grew 6.3%, but that figure is down from 8.8%.

“The interesting thing about mortgages is that it’s outstanding balance, and it’s accumulating” said Bourassa-Ochoa. “When you look at mortgages originated in the quarters, we see that the number of new mortgages has actually decreased, but not by a lot. In 2017 Q3, we see a decrease in the number of mortgages issued at -1.6%, but the total balance that was originated increased 2.6% because prices continue to grow overall, so the mortgages that are originated are going to be relatively larger.”

Bourassa-Ochoa added that debt management is not yet a glaring concern, but it nevertheless requires close monitoring.

“Outstanding credit still remains a concern for Canada’s housing and financial stability, but that said, we’re monitoring many indicators and we don’t feel that there are any vulnerabilities, in terms of Canadians’ consumer debt,” she said. “They are managing their debt relatively well overall. Mortgage delinquency rates are some of the lowest, as well.”

Excessive household debt has been the subject of seemingly myriad alarming headlines recently, but the government’s approach has confounded some. According to the president of First Source Mortgage Corporation, homeownership isn’t fueling the looming debt crisis.

“Government should better focus its regulatory activity on credit card companies, as opposed to mortgages and telling Canadians if, and when, they’ll ever be able to become homeowners,” said David Mandel. “The debt that’s mounting isn’t restricted to mortgage debt, but rather easy-to-get revolving credit.”