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Canadian Mortgage Debt Growth Slows to Two-Decade Low, But Remains Elevated
Canadians are taking on mortgage debt at a slower pace than ever before in two decades, according to data from the Bank of Canada (BoC). However, mortgage debt growth remains historically high, despite the recent slowdown.
The BoC's latest data shows that outstanding mortgage credit reached a new record of $2.04 trillion in July 2023. This is up 0.6% ($12.1 billion) from the previous month and 9.3% ($174.7 billion) from a year ago.
The 0.6% growth in July was the smallest since February 2023, and the slowest annual growth since May 2021. This slowdown is being attributed to higher interest rates, which are making it more expensive for Canadians to borrow money.
Despite the slowdown, mortgage debt growth remains historically high. In fact, the current level of growth is only slightly below the peak levels seen during the 2008 borrowing boom.
So, is Canada's mortgage debt growth too slow?
There is no easy answer to this question. On the one hand, the slowdown in mortgage debt growth is a positive sign, as it suggests that Canadians are taking on less debt. This could help to reduce the risk of a housing market crash.
On the other hand, the current level of mortgage debt growth is still relatively high, which could lead to problems down the road. If interest rates continue to rise, it could become more difficult for Canadians to make their mortgage payments. This could lead to an increase in foreclosures and defaults.
Overall, it is too early to say whether or not Canada's mortgage debt growth is too slow. However, it is important to monitor the situation closely, as there are both positive and negative implications of the current slowdown.
Here are some additional insights into the current state of the Canadian mortgage market:
The average Canadian household now owes $220,000 in mortgage debt.
The average Canadian homeowner spends 32% of their income on housing costs.
The Canadian housing market is showing signs of cooling off, with prices falling in some major cities.
It remains to be seen whether the slowdown in mortgage debt growth will continue. However, it is clear that the Canadian housing market is at a crossroads. If interest rates continue to rise, it could lead to a period of slower growth or even a recession. However, if interest rates stabilize or even fall, the housing market could see a resurgence. Only time will tell what the future holds for the Canadian housing market.