Slowest mortgage growth in two decades under higher interest rates

Ottawa, May 29, 2024

Canada’s total residential mortgage debt stood at $2.16 trillion as of February 2024, up 3.4% from February 2023, representing the slowest growth in 23 years. Higher mortgage costs and uncertainty around a potential decrease in the Bank of Canada’s (BoC) policy interest rate resulted in a softening of home sales and prices across many regions of the country in the second half of 2023. This is according to the Canada Mortgage and Housing Corporation’s (CMHC) latest Residential Mortgage Industry Report (RMIR), which analyses the most recent trends in the residential mortgage industry.

However, this slowdown in mortgage growth could prove to be short-lived. Higher home sales and prices are forecast in coming years, fueled by the expected decline in mortgage rates, strong population growth and increases in real disposable incomes, meaning faster mortgage debt growth is anticipated.

Increasing financial stress for households:

Although delinquency rates are still near historic lows, the latest RMIR shows an uptick in homeowners having difficulties making monthly mortgage payments. For the first time since the beginning of the pandemic, mortgage delinquency rates are trending up. Vulnerabilities first detected in credit card and auto loan markets are therefore moving into the mortgage market as well. The national mortgage delinquency rate hit 0.17% in Q4 2023, from a low of 0.14% in Q3 2022.

This suggests the financial buffers built up during the pandemic are becoming exhausted for some households.

Additional research published today by CMHC Deputy Chief Economist, Tania Bourassa-Ochoa, looks deeper into the growing financial stress Canadian households are facing. You can read Homeowners Turn to Savings as Financial Pressure Mounts in the CMHC Housing Observer.

Quote:

“In a context where debt levels have never been so elevated and households are showing increasing warning signs of financial struggle, household debt vulnerability is becoming a primary area of concern. As homeowners find it more difficult to manage their monthly budgets, policymakers and the financial sector are on high alert when considering risks to the financial industry and the economy.”
— Tania Bourassa-Ochoa, CMHC Deputy Chief Economist