(OTTAWA) Residential mortgage debt among Canadians last year grew at its fastest rate since 2008, the Canada Mortgage and Housing Corporation (CMHC) said on Wednesday.
Posted at 1:23 p.m
Updated at 4:27 p.m
The Federal Housing Agency pointed out that mortgage debt rose 9% year-on-year in 2021 and that its growth surpassed the 10% threshold in the first few months of this year before rising interest rates start to slow Market.
“Household investments are quite high. It is therefore a source of vulnerability,” said Tania Bourassa-Ochoa, senior economist at CMHC and co-author of the Mortgage Trends Report.
Banks saw a 43% increase in new mortgages and a 22% increase in refinancing compared to 2020, resulting in a $400 billion increase in residential mortgages on their balance sheets, while credit unions added $54 billion to their wallets .
However, activity in the housing market has slowed significantly in recent months as central banks have raised interest rates in a bid to curb inflation. On Wednesday, the Greater Toronto Real Estate Board reported a 41% year-over-year decline in residential property sales, while such transactions in the greater Toronto area fell 35% on an annualized basis last month.
CMHC says adjustable rate mortgages have become increasingly favored over the past year as discounts on fixed rates have widened. In the second half of the year, adjustable rate loans accounted for 53% of new mortgage loans, compared to 34% in the first half.
The increase in the number of adjustable rate mortgages means more people are exposed to rising interest rates. Most of these mortgages have fixed rates, so increases would mostly be felt upon renewal.
“Canadians who have taken out a new adjustable-rate mortgage will be the ones who will see the biggest and fastest increase,” Ms. said.me Bourassa-Ochoa.
Data from last year showed little sign of problems with mortgage payments, as high savings rates and a strong housing market helped depress delinquent mortgage loans, which have declined for all types of lenders.
Looking at inequalities in the housing market, the report found that populations identifying as Indigenous, Black, Arab and Hispanic had homeownership rates well below the national average as of the 2016 census — the latest data available at the time were available at the time the authors prepared the report.
The home ownership rate for these groups was just under 50%, while the overall rate for Canada was 74% and slightly higher for white and Chinese populations.
The report found that Indigenous, Black, Hispanic, Arab, and Filipino Canadians have below-average real estate values than other Canadians when accounting for demographics, metropolitan areas, and income factors, a gap that has widened since the 2006 census, since real estate wealth is a strong predictor of the economic success of future generations, the paper goes on to say, any large gap between population groups is an indication that inequalities will persist in the future.