However, the strain in the Canadian housing market is increasingly apparent
Despite the impact of high interest rates and a slowing economy, mortgage debt rose by 1.7% on a quarterly basis during Q3, while non-mortgage debt growth was slightly lower at 1.2%, according to new data from Equifax Canada.
Total consumer debt in Canada grew by $80.9 billion annually to reach $2.4 trillion in Q3 2023.
However, the strain in the Canadian housing market is increasingly apparent, with continued slowdown pulling down new mortgage originations by 9.5% annually in the third quarter.
“The third quarter did see a seasonal increase in mortgage originations compared to Q2, but at an annualized level, originations have been falling for eight consecutive quarters,” Equifax said.
“Despite high demand from potential first-time home buyers and upcoming renewals, affordability concerns and higher interest rates are likely key factors deterring many Canadians from taking out new mortgages.”
At the same time, the average loan amount on new mortgage originations went up by 7.4% from the previous quarter, reaching $343,000.
Average monthly payments on new loans grew by 10.4% quarterly, with first-time home buyers in Ontario and British Columbia now paying over $3,000 monthly.
“Currently, population growth exceeds new housing volumes, and this may be preventing home prices from going down despite the high interest rates,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada.
“That, in turn, is slowing the inflation drop which may limit the ability to reduce interest rates quickly. Unfortunately that may not be good news for consumers who will be renewing their mortgages in 2024.”
Shilpa Mishra of BDO Canada, highlights the conservative lending approach of major Canadian financial institutions as a key factor in the sluggish growth of the national debt market in Q3 2023.
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 20, 2023
Read more: https://t.co/WKkGuJZcKk#MortgageIndustry #Lending #Mortgage #Economy
Non-mortgage debt also on the rise
Credit cards were a major driver of the Q3 spike in non-mortgage debt, Equifax said. Total card balances reached a new record high of $113.4 billion during the quarter, up by 16% annually.
“The increase in credit card debt is being driven by several factors, including the rising cost of living, higher interest rates, and the economic slowdown,” Oakes added. “These factors are putting a strain on household budgets, making it difficult for many Canadians to make ends meet.”
“Even if we take into account the increased costs of goods due to inflation, the growth in card balance compared to last year is still substantial. Monthly spend levels on cards have stabilized in recent months, so changing payment levels are contributing to that balance growth.”
