In the midst of the housing boom, the people of Canada are burdening themselves with debt to purchase homes in what experts are seeing as 'fastest' in over a decade. Statistics Canada reported that the household mortgage debt was up by 1 percent in April to stand at CND 1.69 trillion. This is the fastest figure since 2010. The Bank of Canada has said this increasing mortgage debt is a 'significant vulnerability to the economy.' In fact, the mortgage debt in Canada is now equal to the GDP of the whole country.
In the largest one-month increase ever recorded, the residential mortgage credit was up by CND 17 billion during April. The pandemic brought along bidding wars and a hike in property value across Canada amid low borrowing rates and heightened demand for single-family homes. The new data is representative of the fact that the high prices are leading to mortgage debt which is worrying the policymakers.
Data by the Canadian Real Estate Association indicates the average selling price of a Canadian home has increased 38 percent at CND 688,208 in the last year. While the total credit to households increased to 0.9 percent in April, the fastest since 2011, mortgage debts are touching the skies as people continue to buy the available houses. Non-mortgage credit rose too but is still within pre-pandemic levels.
But the blazing housing market of Canada is continuing to be moderate as demand, supply, and average prices came down in May. This can be attributed to the fact that buyer frustration, offer fatigue, and the urgent need to purchase a house during the pandemic have all begun to slacken a bit.
The overall consumer debt to have risen to stand at CND 2.08 trillion. This is owing to the unparalleled new mortgages the country is seeing. A report by Equifax Canada suggested that though people are cutting back on credit card debts and other kinds of debts since the onset of the pandemic, mortgages are still on an upward curve. As per the figures by Statistics Canada, the overall total credit liabilities of households were at CND 2,482.3 billion at the end of April 2021.
To compare the actuals as against the new mortgages of 2020 Q1, they are up by 41.2 percent in 2021 Q1. The average limit on new mortgages was up by 20.5 percent to stand at CND 326,930. Hence, the total consumer debt has risen by 0.62 percent as compared to the last quarter. It has also increased by 4.78 percent as compared to Q1 of 2020.
You can read more about the overnight lending rate which will be at 0.25 percent, here. It will be just like it has been since March 2020, a figure expected to alter only a year later.
If you are looking to buy a house and take out a mortgage and have any questions, doubts, or concerns, do not hesitate to reach out to LendX.