Canadian Mortgage Credit Grinds To A Halt, Slowest September In Two Decades

Canadian mortgage credit had an unusually slow month, as the hangover from higher rates starts to settle in. Bank of Canada (BoC) data shows consumer mortgages debt continued to decelerate in September. Higher rates and weaker home sales combined for the slowest September in two decades.

Canadians Owe Over $2.1 Trillion In Mortgage Debt

Canadian mortgage debt surged to a new record, which is hardly a surprise. The outstanding balance reached $2.1 trillion in September, up 0.3% ($6.4 billion) in the month. Compared to last year, the balance is 8.5% ($161.3 billion) higher. As big as those numbers sound, things are actually grinding to a halt.

Canadian Residential Mortgage Debt

The outstanding balance of Canadian residential mortgage debt held by institutions.

Source: Bank of Canada; Better Dwelling.

Canada Hasn’t Seen A September This Slow In 20 Years

Canadian mortgage debt was strangely slow when it came to monthly growth. In dollar terms, it was the smallest advance since February 2020. It was also the slowest September since 2002, back when the Iraq invasion was first getting started. It’s been a looong time.

Annual Mortgage Growth Has Peaked

The slowdown is wearing away at the annual trend as well, though it may seem high. Annual growth peaked at 10.8% earlier this year, and decelerated to 8.5% in September. It would normally be a very large number, but adjusting for lofty inflation it works out to just 1.6 points of growth. It’s also slowing much faster than inflation is these days.

Canadian Residential Mortgage Credit Growth

The 3-month (annualized) and 12-month rate of growth for Canadian residential mortgage credit.

Source: Bank of Canada; Better Dwelling.

Canadian mortgage growth is predictably slowing as higher interest rates throttle credit. Smaller mortgages and fewer home purchases are intended consequences to slow excess demand. This is likely to continue through at least the first half of 2023.

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