Mortgage debt among Canadian households increased at the fastest pace in a decade, amid record-low interest rates and increased demand for more spacious housing.
According to Statistics Canada, the overall mortgage debt level among Canadian households rose by $118 billion, or 7.6%, to a total of $1.7 trillion in 2020. This marks the largest annual increase since 2010, significantly surpassing the yearly growth average of 5.4% recorded over the past decade. In addition, 2020 was also the first year that outstanding mortgage debt rose by $100 billion within the span of one year.
The sudden rise in mortgage debt has been mostly the result of historically-low interest rates, coupled with a heightened demand for homes with more living space amid stay-at-home orders and remote work arrangements. However, non-mortgage debt, which is primary used to fund consumption, declined by 1.5% in December compared to the same time a year prior, marking the largest decline on records dating back to the 1990s. In fact, households finished off the year with almost $12 billion less in non-mortgage debt compared to the beginning of 2020.
The surprising decline in non-mortgage debt can be attributed to the generous government transfer payments and emergency income supports, many of which helped lower household balance sheets. In addition, the numerous stay-at-home orders, coupled with restrictions on shopping and travel also contributed to the record decline in non-mortgage borrowing.
Overall, the increase in mortgage debt was moderately offset by the decrease in non-mortgage loans, as credit liabilities of households came to a total of $2.46 trillion by the end of 2020.
Information for this briefing was found via Statistics Canada. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.