Canada Mortgage Debt Growth Slows Amid Economic Uncertainty But Rebound Expected

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Canada Mortgage and Housing Corporation (CMHC) reported that the nation's total residential mortgage debt reached $2.16 trillion as of February 2024, marking a 3.4% increase year-over-year, which is the slowest growth in 23 years. This deceleration is attributed to higher mortgage costs and uncertainty regarding the Bank of Canada's future interest rate decisions, which resulted in softer home sales and prices in the latter half of 2023. Despite this, CMHC anticipates a potential rebound in mortgage growth due to expected declines in mortgage rates, population growth, and increases in real disposable incomes.

However, the CMHC warned that elevated debt levels and signs of financial struggles among households are becoming significant concerns. The agency highlighted that as homeowners face difficulties managing their monthly budgets, there is increased vigilance among policymakers and the financial sector regarding the risks to the financial industry and the broader economy. The report also noted a shift in borrower preferences towards shorter-term fixed-rate mortgages, reflecting ongoing uncertainty about future mortgage rate movements despite increased discounts on five-year fixed-rate mortgages.

Additionally, the CMHC report indicated a slight rise in the national mortgage delinquency rate to 0.17% in the fourth quarter of 2023, though it remains near historic lows. It also pointed out that the Big Six banks are capturing a larger share of the market for extended mortgages, with their market share increasing by 11.8 percentage points, driven by refinances and renewals. Conversely, other chartered banks and credit unions saw decreases in their market shares by 6.9 and 3.1 percentage points, respectively.

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