Canadian Mortgage Borrowing Is Showing Nearly Zero Real Growth

Higher interest rates did something even a pandemic couldn’t—it slowed Canadian mortgage borrowing. Bank of Canada (BoC) data shows that mortgage credit continues to decelerate in May. When inflation is factored in, mortgage credit growth falls to a level rarely seen in Canada. 

Canadians Owe Over $2.1 Trillion In Mortgage Debt 

Canadian mortgage debt is rising, but at a much slower-than-normal pace. The outstanding balance of mortgage credit climbed to $2.1 trillion in May, a 4.4% increase from last year. It was the slowest growth since 2019, and a growth rate typically not seen outside of recession.  

Canadian Mortgage Credit Is Even Worse When Considering Inflation

Nominal growth may be similar to 2019, but inflation makes the current environment very different. Real, or inflation-adjusted, annual growth over the same period was just 1.0% in May. Not quite zero, but only slightly higher than April (+0.7%), which has been the closest to zero since the early 2000s recession.

Real Canadian Mortgage Credit Growth

The inflation-adjusted annual growth rate for outstanding mortgage credit owed by Canadian households. 

Source: Bank of Canada; Statistics Canada; Better Dwelling. 

The read is tricky here, since the slight acceleration might appear to be a reversal. However, it’s too early to tell if the trend changed direction, since a single month isn’t a trend. 

There’s even less certainty when nominal growth is considered. Real mortgage credit saw an acceleration due to falling inflation, not an acceleration to nominal growth. Without persistent acceleration, a single month is mostly just noise. 

Slowing mortgage credit, either nominal or real, is typically a sign of a slowing economy. With Canada’s economy so heavily dependent on housing, and new housing supply slowing despite rising population growth, it’s a prominent confirmation of the slowdown experts warn is approaching.