Economist: Mortgage credit growth to slow

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CAAMP’s chief economist, Will Dunning, postulates the mortgage credit growth rate in Canada will slow down in the near future, citing a number of contributing factors.

“Growth of mortgage credit in Canada is driven by several factors. The most important is the volume of new housing that is completed and requires mortgage financing,” Dunning wrote in CAAMP’s latest report, Annual State of the Residential Mortgage Market in Canada. “Housing completions are expected to slow but only slightly and this will contribute to a very gradual slowing in the rate of mortgage credit growth.”

Persistent record-low interest rates – though positive for Canadians homebuyers – have also contributed to sluggish credit growth.

“Another significant factor is that low interest rates mean that consumers pay less for interest and therefore are able to pay off principal more rapidly,” Dunning wrote. “Current low interest rates have therefore tended to reduce the rate of growth of mortgage debt.”

Dunning also cites the negative impact mortgage insurance criteria changes have had on resales and this, coupled with the record-low rates, have contributed to lower-than expected activity, despite favourable market conditions. Still, he believes the negative impacts have diminished slightly.

“Mortgage credit growth in Canada has averaged 8.1 per cent per year during the past decade. The growth rate has slowed, and is currently 5.2 per cent year-over-year (as of August). The growth rate is likely to slow gradually during 2015 (to about 4.5 per cent by year end),” Dunning wrote. “By the end of 2015, total outstanding residential mortgage credit is forecast at $1.34 trillion, up from the most recent figure of $1.26 trillion (as of August 2014). By the end of 2016 the figure may be close to $1.4 trillion.”
  • Layth Matthews on 2014-11-19 1:30:02 PM

    First, let me say that this economist is exceptional.

    I think it is really cool that the low interest rates have resulted in a slowing of mortgage credit. Ironically, that is very good news for many of us mortgage brokers. I'm just starting to see clients with room to refinance after the last several years of guideline tightening.

    The old fashioned ideal is to have a steady pace of mortgage credit expansion that is outpaced by home prices - so a steady pace of home equity expansion. i.e. housing as a good investment, which is what attracted me to this industry in the first place.

    The progression of housing prices from here is anybody's guess, but if the pace of "housing completions" is to slow, and rates will remain low, those are at least two positives.

    Now that we have weathered the storm of conservative guidelines we mortgage brokers will benefit from the steady accumulation of equity that shorter amortizations do provide - as long has home prices hold up.


    The challenge will be the demographics. Our population growth is going to be slow and aging for the next 20 years. So we can look forward to ever increasing tax rates or we will be living in a very different society.

    Maybe we can find our way into driving economic growth through creativity vs. ever expanding consumption. Bring on the Gross National Happiness indicators! It's the rise of savings, quality vs. quantity, renovation, design, energy efficiency and anything that reduces the cost of living - and the taxable income required to support it.

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