Canadians are slowing the pace at which they use their homes as an ATM. Office of the Superintendent of Financial Institutions (OSFI) show loans secured by residential real estate reached a new all-time high in September. The new high came with some of the lowest 12-month growth Canadians have seen in a long time.
Loans Secured By Residential Real Estate
Loans secured by residential real estate is home equity used as collateral. It’s a quick and easy way to borrow from the value of your home. Since lenders have something to sell if they can’t pay it back, they charge lower interest rates on the debt. The most common form is a home equity line of credit (HELOC), but other similar products exit.
Canadians Borrowed Over $303 Billion of Home Equity
The balance of debt tied to residential home equity hit a new record. The balance of loans reached $303.93 billion in September, up 0.17% from a month before. This represents an increase of 3.98%, when compared to the same month last year. It’s a record high, but also the slowest 12-month growth in over a year. Most of this weakness is personal loan growth.
Total Loans Secured With Residential Real Estate
The total of personal and business loans, secured with residential real estate.
Source: Regulatory Filings, Better Dwelling.
Over $270 Billion of Home Equity Debt Is For Personal Loans
The majority is for personal, or “non-business” use, and it’s also reached a new record high. Personal use represents $270.28 billion in September, up a minor 0.08% from a month before. This works out to a 2.65% increase compared to last year. If that growth rate sounds low for this segment, that’s because it is. Canadians haven’t borrowed home equity at this slow of a pace, since the beginning of 2017.
Personal Loans Secured With Residential Real Estate
The total of personal loans, secured with residential real estate.
Source: Regulatory Filings, Better Dwelling.
Over $33 Billion In Home Equity Loans Are For Businesses
The balance of residential home equity debt is for businesses – which is growing very fast. Filings show a balance of $33.65 billion in September, up 0.93% from the month before. This represents an increase of 16.06% compared to the same month last year. There’s still a couple of months with higher balances, but the growth rate is still huge.
Business Loans Secured With Residential Real Estate
The total of business loans, secured with residential real estate.
Source: Regulatory Filings, Better Dwelling.
Canadians are borrowing home equity at a slower pace, which gives a mixed takeaway. Since a large portion of consumer spending was HELOC driven, the economy might experience a hiccup here. On the other hand, lower levels of debt mean households would be more resilient to economic shock.
Like this post? Like us on Facebook for the next one in your feed.
Right when pre-sale condo sales begin to dry up? Strange coincidence.
If you study the graph of HELOC loans you see a significant change in the graph curve beginning in 2016.
2016 is also the housing peak in Vancouver..and since then housing prices have fallen significantly ..as much as 50% in West Vancouver..
This would indicate that the housing flipping market came to a crashing halt and Heloc loans are then needed to support mortgages and lifestyles..
When will condo prices collapse?
These increased condo units in the skies doesn’t translate to lower rents. I wonder why.
With the new government program giving downpayments to people that can’t save the floor has been set at these prices
I think this new program was just to gain votes. The government (taxpayers) doesn’t need to be invested in these properties. Easing the stress test would have helped just as much, without taxpayer investment.
Fuk this, this is just force wealth transfer of labor and wealth from young families to boomers. People who suffer are young families, who benefits?
The politicians won’t do anything about it, time to protest like HongKong!