While the uptick in mortgages is good news for the industry, the levels of debt could be a future concern once rates climb upwards.
“I think people are taking on a huge amount of debt and it could definitely come back to haunt us if something happens like interest rates rising or a housing correction,” Michael Sjerven of Verico
Vivid Mortgage told MBN
. “We just need to be a little more conservative and as brokers focus on more than just getting a client approved for what they qualify for.”
The latest bank data shows that total Canadian outstanding household credit rose to $1.869 trillion in August, up an annualized pace of 5.9% from July.
Compared to the previous year, household debts were up 5% - the highest year-over-year increase since October 2012.
Residential mortgage debt shot up 7.5% annualized in August, raising the three-month rate to 7%.
However, consumer debt (credit cards, car loans, personal lines of credit) only increased a modest 2% during the same period.
During the first half of 2015, Canadians were making an effort to reduce their debt, according to a Manulife Bank of Canada debt survey.
The spring survey revealed that four in 10 homeowners made an extra payment on their mortgage in the last 12 months, with 56% of homeowners reducing their debt.
“Effective debt management is absolutely central to long-term financial health,” said Rick Lunny, president and CEO of Manulife Bank of Canada in a June press release, “and clearly many Canadians are taking advantage of the low-rate environment to reduce their debt.”
Judging by the new August numbers, it looks as if Canadians are also taking advantage of those same low rates to increase their mortgage debt.