Mortgage loans accounted for nearly two-thirds of total debt, followed by home equity lines of credit, credit cards and auto loans: CMHC

The level of indebtedness of Canadian households rose faster than income in 2018, according to a new report by Canada Mortgage and Housing Corp.

“As a result, the debt-to-income ratio continued to increase over the course of the year, reaching 178.5 per cent in the fourth quarter of 2018, a record high. According to Equifax data for (the fourth quarter) 2018, mortgage loans accounted for nearly two-thirds of the total debt held by Canadians consumers, while the remainder was in home equity lines of credit (10.8 per cent), credit cards (5.3 per cent), auto loans (4.1 per cent) and personal lines of credits (3.1 per cent),” said the Mortgage and Consumer Credit Trends, National Report – Q4 2018.

deeper in debt
Average monthly obligations per consumer increased by 4.5 per cent in the fourth quarter of 2018 compared to a year earlier.

The report said the number of mortgage loans kept on growing in the fourth quarter 2018, but at a slower pace than a year earlier due to a reduction in the number of new mortgages issued over the same period and generally lower housing activity in 2018 when compared to 2017. But the average mortgage loan value reached $209,570, 3.1 per cent higher than a year earlier, while the average balance for new loans declined 3.8 per cent from the same period.

“The number of transactions on both new home and resale market declined in 2018. So to did the average MLS price. Homeownership demand has been tempered by slightly higher borrowing costs, slower economic growth and recent regulations around mortgage markets. Together, these factors contributed to reducing the number of new loans and their average balance at the national level,” said the report.

“Yet, despite the easing in 2018, average house prices in Canada remain historically elevated. This explains, in part, why the average balance of new loans remains higher than in the overall mortgage market. Consumers with a mortgage continued to increase their debt level outside of their mortgage. Their average outstanding balance in credit cards and line of credits grew at a faster pace than in 2017, except for HELOCs and auto loans, which increased at a slightly slower pace. These trends were also observed amongst consumers without a mortgage.”

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The report said the rise in outstanding balance of non-mortgage debt grew more steeply amongst Vancouver, Edmonton and Toronto mortgage holders. Consumers without a mortgage in Toronto and Edmonton also posted above-average growth in outstanding balances. These numbers may indicate that consumers in these regions are potentially on average more financially strained, it said.

“Average monthly obligations per consumer increased by 4.5 per cent in the fourth quarter of 2018 compared to a year earlier. Over the same period average disposable income rose by 2.5 per cent. Therefore, for the average Canadian, the monthly obligation burden has increased from last year relative to their income.”

– Mario Toneguzzi


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