Canada's mortgage growth falls to lowest levels since 2001

by Ephraim Vecina 08 May 2018

Mortgage growth in Canada has declined to its weakest level in nearly two decades amid rising interest rates and new mortgage rules that took effect at the start of the year.

Total residential mortgage credit grew just 0.3% on average over the last three months, according to new data from the Bank of Canada. Representing the slowest rate since 2001, this was down from 0.47% at the end of 2017, and about half the average 0.57% pace seen over the past twenty years.

Outstanding residential mortgage loans in Canada now totalled $1.53 trillion, the BoC data showed.

Read more: Rising rates not enough to deter Canadians’ home buying plans

Borrowing costs are rising for the first time in almost a decade, and recent rule changes are making it tougher to get a mortgage. Just how sensitive consumers – and the economy – will be to higher rates has become a key question for policy makers, with Canadians now holding a record $1.70 in debt for every dollar of disposable income.

Dominique Lapointe, an economist at the University of Ottawa’s Institute of Fiscal Studies and Democracy stated that slowing credit growth is a potential headwind for Canada’s economy, at least in the short run.

“In the near term, it’s bad for growth. In the longer-run, when it leads to deleveraging, it’s good for financial stability. What matters is the speed of deceleration, or contraction, in credit,” Lapointe told Bloomberg.

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