A vast majority of this sum went to personal loans, signalling much larger borrowing to cover other bills
Data from the Office of the Superintendent of Financial Institutions data indicated that the national balance of loans secured by residential property reached a new record high of $301.18 billion in May.
At 0.08% month-over-month, this increase was much smaller than average. However, when looked at an annual basis, the 5.73% growth from May 2018 was actually the second largest for that month in roughly seven years.
Of the overall home equity volume, fully $268.56 billion went into personal loans, likely pointing to a much increased incidence of borrowing to pay other bills. This was a 0.06% increase month-over-month, and 4.58% year-over-year.
“When this segment rises, it’s often seen as a concerning sign. The Canadian government believes this could be obfuscating financial distress statistics,” Better Dwelling explained in its analysis of the OSFI figures.
Meanwhile, $32.63 billion of the May balance was used to secure business loans, growing by 0.26% monthly and 16.32% annually.
“This number has seen relatively minor movement over the past few months. It’s still under the peak reached in 2017.”
This data followed OSFI filings showing that the outstanding balance of reverse mortgage debt throughout Canada reached $3.66 billion in April, which was 28.15% larger on a year-over-year basis.
Said level was “very large growth at a time when other credit segments are much lower,” Better Dwelling said. “As Canada’s population ages, more cash-poor, house-rich retirees are also going to be looking towards this segment.”
