Deceleration in housing market activity had only a minimal impact on new mortgage loan amounts
Canada’s total consumer debt load saw an 8.2% annual increase in the second quarter to reach $2.32 trillion, according to Equifax Canada.
The latest Market Pulse consumer credit trends and insights report by Equifax showed that a surge in new lending, coupled with greater inflation-impelled spending, pushed non-mortgage debt up by 5.2% year over year, reaching $591.4 billion.
This placed the average non-mortgage debt per capita to $21,128, representing a 2.4% annual gain.
“The cost-of-living has been increasing across Canada, and indeed globally, with rising inflation being seen across essentials like housing and energy as well as many other goods and services,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada.
Read more: Canada’s outstanding mortgage debt now exceeds $1.6 trillion
Deceleration in housing market activity had only a minimal impact on new mortgage loan amounts. The average loan amount for new mortgages remained high at $367,500, with the average for first-time buyers at $430,700.
The costs are especially steep in Toronto and Vancouver, where the average loan amount for first-time buyers exceeded $600,000.
“While the slowdown in rising prices is positive, the average loan amount of first-time home buyers only dropped by 0.5% this quarter when compared to last quarter, yet their average monthly payments increased by 10%,” Equifax said.
“The cooling housing market in Canada should not be mistaken for increasing affordability,” Oakes added. “Affordability depends not just on home prices, but also on monthly payment obligations for a mortgage. Higher interest rates, coupled with high inflation, can really stretch a consumer’s monthly expenditure, while many could find it difficult to qualify for a mortgage.”
