Residential mortgage borrowing is expected to continue to increase, while other credit sources “tap the breaks,” according to RBC Economics.
Industry players will also likely find the slowing of consumer credit encouraging, as it points to more prudent financial habits forming among Canadians.
“The holding pattern evident in residential mortgage borrowing over the first four months of the year proved to be temporary with the resumption of an upward trend emerging this summer,” Laura Cooper, an economist with RBC, said in the bank’s latest research note on credit. “Credit data for August confirmed this momentum with the annual rate of increase clocking in at 5.9% in the month, up from 5.6% and 5.7% seen in June and July, respectively, and the largest increase since December 2012.”
The low rate environment is certainly drawing clients to the market, and that trend is expected to continue, meaning many brokers may be in store for a record year.
Non-mortgage borrowing slowed to 2.9% last month, according to the bank.
“Canadian households accumulated debt at a 5.0% annual rate in August, thereby representing a slight pick-up from the 4.9% pace seen in July with the lift coming from a strong appetite for residential mortgage loans,” Cooper said. “At the same time, firms eased up on their financing needs with overall business credit rising by 8.3% from a year-ago compared to the 8.8% seen in July and a cycle-high 9.1% recorded in March 2015.”
To get a glimpse of overall credit growth in Canada, see the chart below.
Near-record housing activity this year has translated into exponential mortgage growth while consumer credit grinds to a halt.