Canada’s mortgage debt balance is inexorably swelling

This is despite one of the slowest May growth rates in nearly 30 years

Canada’s mortgage debt balance is inexorably swelling

Canada’s total mortgage debt reached a new record high of $1.56 trillion in May, but the annual growth rate was among the lowest for that month in nearly three decades.

According to the Bank of Canada, the overall mortgage debt balance grew by 3.64% year-over-year. This was 22.2% weaker than the annual growth seen during May 2018, and this was “the slowest annual rate of growth for any May in at least 29 years, with the exception of 2001.”

“That one exception saw interest rates cut multiple times to bring back growth,” Better Dwelling explained in its analysis of the BoC figures. “There are a few signs mortgage growth may have bottomed, pending no external pressure. However, the traditional busy season for real estate sales has mostly passed. That could damper the current momentum.”

Updated numbers from Statistics Canada’s latest Survey of Financial Security showed that an ever-larger number of Canadian households are finding it harder to service their debts, with around 4% missing (or paying late) their mortgage bills in 2018.

Among those without mortgages, 11% skipped or delayed their payments last year.

In terms of debt-to-asset ratios, StatsCan data covering Q4 2016 revealed that households with DTAs greater than 50% struggled the most with making payments on time; approximately 16.1% of respondents in this cohort were delinquent with their financial accountabilities.

More troubling was the fact that the budget tightness indicated by these findings has only worsened. The DTA ratio of an average household has increased by 4.41% since then.

“Canadians are falling behind on bills, and it gets worse as they assume more debt,” Better Dwelling added. “People are shifting their debts around, but not actually making much progress.”