Mortgage growth in Canada slowed in January from a year ago due to inflation, but debt rose 6%.
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That’s the conclusion of CMHC’s latest Residential Mortgage Industry Report.
In January 2023, residential mortgage debt in Canada stood at $2.08 trillion. High inflation, rapidly rising interest rates and declining housing markets across the country have led to fewer people wanting to buy property, the report said.
“Given the record level of mortgage debt and the rising cost of living, one can wonder about the ability of Canadian households to repay their debt every month. […] In difficult financial situations, consumer accounts are typically delinquent for credit cards, lines of credit and car loans before mortgages,” said Tania Bourassa-Ochoa, Senior Housing Research Specialist at the CMHC.
According to the report, in the face of rising interest rates, consumers are choosing options that allow them to reduce their monthly debt service costs.
For example, mortgage borrowers opt for short-term fixed rate mortgages in the expectation of lower interest rates in the future.
Five-year fixed rate mortgages now represent less than 15% of new mortgages. Those with variable rates represent less than 20% of new mortgages, it was specified.
Also, as the cost of debt increases, fewer mortgage borrowers apply for refinancing. The data also shows a 32% drop in refinancing in 2022.