(Ottawa) The Canada Mortgage and Housing Corporation (CMHC) says the country’s total residential mortgage debt stood at $2.16 trillion in February of this year, up 3.4% year-over-year and slowest growth in 23 years.
The federal housing agency says in a new report that rising mortgage costs and uncertainty surrounding the Bank of Canada’s possible cut in its key interest rate have moderated sales and prices in the housing market. housing in many parts of the country in the second half of 2023.
However, CMHC expects the growth rate of mortgage debt to increase amid forecasts of higher sales and home prices in the coming years. It says an anticipated decline in mortgage rates, population growth and increases in real disposable income will likely fuel the recovery.
“As household debt levels have reached a historic high, the financial fragility of indebted households has become one of our main sources of concern,” said CMHC Deputy Chief Economist Tania Bourassa- Ochoa, in a press release.
“Policymakers and the financial sector are closely monitoring risks to the overall economy and the stability of the financial system. Indeed, an unexpected shock could push a greater number of households into default,” she stressed.
The report also said borrowers continue to favor shorter-term fixed-rate mortgages over traditional five-year fixed terms, as they remain uncertain about the outlook for short- and medium-term mortgage rates.
This is despite “considerable discounts” offered by lenders on five-year fixed rate mortgages in the first two months of this year, which marked a reversal of the trend compared to the second half of 2023.
“Lenders are pricing in potential Bank of Canada rate cuts faster than they expected last year. They are therefore looking to secure mortgages at relatively high rates,” the report said.
Terms ranging from three years to less than five years remained the most popular choice, accounting for almost 40% of all newly extended mortgages as of February 2024. Adjustable rate mortgages accounted for 15% of all newly extended mortgages. prolonged.
The report also shows that the national rate of delinquent mortgages reached 0.17% in the fourth quarter of last year, still near historic lows, but trending upward for the first time since the start of the pandemic.
It also highlights that the big six banks are taking a growing share of the extended mortgage market.
In the fourth quarter of 2023, the share of these banks increased by 11.8 percentage points compared to last year, thanks to increased refinancing and renewals. Other chartered banks and credit unions recorded declines of 6.9 and 3.1 percentage points, respectively.