Mortgage growth slows but debt remains at record highs

Ottawa, May 25, 2023

As of January 2023, residential mortgage debt in Canada stood at $2.08 trillion, an increase of 6% compared to January 2022, but the rate of growth slowed compared to recent years. Inflation, rapidly rising interest rates, and cooling housing markets across the country weakened consumer confidence in 2022, resulting in fewer consumers looking to purchase a property and, consequently, decelerating mortgage growth in Canada. This is according to the latest CMHC Residential Mortgage Industry Report (RMIR), which analyses the most recent trends in the residential mortgage industry. Despite slowing mortgage growth, Canadian households still face record levels of mortgage debt.

“With record levels of mortgage debt and the higher cost of living, questions are arising around the ability of Canadian households to make their monthly debt payments,” said Tania Bourassa-Ochoa, Senior Specialist of Housing Research for CMHC. “Although mortgages in arrears remain low, they are a lagged indicator and in challenging financial situations, consumers will typically be delinquent on credit cards, lines of credit, or auto loans before mortgages. Increasing delinquencies for these credit products indicate a larger number of consumers are having difficulties with their debt payments.”

The latest RMIR also shows consumers are reacting to rising interest rates by choosing options to reduce their monthly debt servicing costs:

Mortgage borrowers are opting for shorter-term fixed-rate mortgages in expectation of decreasing interest rates in the future.
Fixed-rate 5-year mortgages fell to less than 15% of new mortgages, with many consumers opting for 2 – 3-year fixed rates, and variable-rate mortgages dropping to less than 20% of new mortgages.
With cost of debt being more expensive, fewer mortgage borrowers are applying for refinancing, as the data shows a 32% drop in refinances in 2022.
More mortgage borrowers are choosing longer amortization periods, meaning they will be paying down their homes over a longer period of time, but for the short-term reducing their mortgage payment.

Download and read the entire Residential Mortgage Industry Report (RMIR) on the CMHC website.

You can view the podcast breaking down CMHC’s latest Residential Mortgage Industry Report (RMIR) on our YouTube channel.