A Historical Low: Canada’s Mortgage Credit Growth Slows to 2001 Levels

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Despite Canada witnessing a record surge in population growth, the mortgage growth has been unusually slow. Data from the Bank of Canada (BoC) reveals that the growth of outstanding residential credit decelerated further in November, marking the slowest pace seen by Canadians in over two decades.

Canadian mortgage credit continues to rise. The outstanding residential mortgage credit increased by 0.2% (+$4.9 billion), reaching $2.2 trillion in November. This signifies a 3.4% increase (+$70.1 billion) compared to the same month the previous year.

While this might seem substantial, considering that borrowing for housing is almost a cultural norm in Canada, this month yet again recorded slower growth.

Contrary to reports of heightened activity in November, the mortgage credit did not mirror this trend. The annualized growth was 0.1 points lower than the previous month and less than half (-56%) compared to the previous year. This isn’t just a slowdown compared to recent data; it’s a generational deceleration.

It’s been over two decades since the last time borrowing was this slow, a period during which a generation of Canadians reached adulthood. To witness such a low annualized growth rate, we need to rewind to 2001. The economy was not in a particularly favourable state back then, with the Dotcom Bubble bursting and an oil recession hitting the country. Interestingly, this was also the last time the Bank of Canada’s overnight rate was around the current level, although it was on a downward trajectory at that point.

The deceleration of mortgage credit and the rising inventory seem to contradict the population growth. Despite the population increasing at a record rate, this surge isn’t translating into more residential mortgage borrowing. This could be a strong indicator that, despite the limited housing options, Canadians are finding it hard to digest the current price levels. Whether cheaper debt can alter this scenario remains to be seen. Stay tuned to the Real Estate News Network for more updates on the Canadian real estate market.

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