Canadian mortgage originations were down in the last quarter of 2017 compared to a year earlier, but the overall loan debt increased.
The Canada Mortgage and Housing Corporation’s Mortgage and Consumer Credit Trends report determined that the likely reason is exorbitant price points in major Canadian markets.
“Overall mortgage debt has been increasing but at a slower pace,” said Tania Bourassa-Ochoa, a senior economic researcher with CMHC. “It’s been increasing at a slower pace, and one of the reasons is because the values of the mortgage loans that are being originated are higher. The new mortgages over $400,000 that were originated in the last quarter of 2017 have been increasing, and when you take a look at mortgages under $300,000 those have been decreasing.”
Another reason for the slower pace of rising mortgage debt is home sales decreased. In Toronto, in particular, the market hit a fever pitch in 2016, but cooled almost overnight with the introduction of the Fair Housing Plan.
The Mortgage and Consumer Credit Trends report also found home equity lines of credit doubled year-over-year during Q4 of 2017 compared to the same period a year earlier, but fell short of credit card and auto loan debt growth. Credit card balances are also hit a six-year high.
“Consumers have high debt loads at the moment, and we’re seeing revolving credit balances, like HELOCs and credit cards, have been increasing,” said Bourassa-Ochoa. “Because of this, while the vulnerability remains low, we’re still required to monitor this closely because it might suggest that some credit holders are using unsecured debt to maintain their levels of consumption.”
The good news is that mortgage delinquency dropped across all age groups. The largest recorded drop in arrears was among mortgage holders aged 65 and older.
“Which is quite interesting because in the past this age group used to have a significantly higher mortgage delinquency rate,” said Bourassa-Ochoa. “So now we’re seeing 65-and-up recorded the largest drop. We compare all age groups, and we see the 25- to 35-year-old group has the lowest delinquency rate, in terms of mortgages.”
The overall signs of vulnerability relating to mortgage holders remain low, added Bourassa-Ochoa.
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