by Lyle Adriano
In October, household credit growth rose by 5.0% compared to a year ago, thanks to increased mortgage borrowing activity—a 6.0% surge in borrowing from last year’s record, setting a record pace since October 2012.
Total household credit is at $1.888 trillion, with home mortgages comprising more than 70% ($1.346 trillion) of the total, according to the Royal Bank
"After recording a 5.4 per cent rate of growth for five consecutive months to kick off 2015, this component of household credit has gradually accelerated against a backdrop of accommodative borrowing conditions and strong housing activity in a handful of markets across the country," wrote Laura Cooper, economist for the Royal Bank, in the report.
On the other hand, consumer credit growth dropped to 2.7%, its slowest pace in a year. Its total was at $542 billion.
Canada’s heightened mortgage borrowing activity coincides with the relative instability of the nation’s housing market. Although Vancouver and Toronto continue to be popular with homebuyers, other markets were not as fortunate.
Five-year fixed rate products are gradually becoming popular with consumers, despite the Bank of Canada keeping its overnight rate target at 0.5%, still holding variable rate mortgages at low rates.
The report noted that the increase in household credit corresponds to the slower growth in business credit and longer-term financing.
Long-term financing rose 6.4% in October versus last year’s record. In September, long-term financing increased by 7.1%.