Canadian real estate sales are hitting record levels, but mortgage growth is slowing. Bank of Canada (BoC) data shows outstanding mortgage credit hit a new all-time high in July. Even with the new high and various factors working in its favor, the rate of growth is still decelerating.
Mortgage Debt Reached Over $1.69 Trillion In July
Canadian mortgage credit reached a new record high last month, jumping by half a point. The balance of outstanding credit reached $1.69 trillion in July, up 0.47% from a month before. The increase brings the balance 5.52% higher than the same month last year. The record high came with substantial growth, but it is continuing to cool.
Canadian Outstanding Mortgage Credit
The outstanding balance of Canadian mortgage credit.
Despite record sales in the month, mortgage credit growth has been slowing. The 5.52% 12-month growth is the second consecutive month of deceleration. This was expected due to the comparison period. The first half of 2019 was extremely slow, with most mortgage credit growth pushed to the second half. As we approach a more normal period of growth, we should see this balance a little more.
There’s still a whole lot of mortgages on payment deferrals. Banks reported 16% of mortgages were still deferred at the end of July. On earnings calls last week, many banks stated deferrals have begun expiring, and people are transitioning back to regular payments. This is likely to contribute to lowering future outstanding mortgage growth.
Mortgage credit growth slowed, despite July being a record month for sales. This is possibly an indication that smaller mortgages are being taken out, as luxury lags. There’s a number of factors working in favor of higher credit growth, including deferrals and rock bottom rates. Even with those factors, the expected slowdown is still carrying on.