Canadians' mortgage debt grew 9% last year, CMHC says

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Canadians' mortgage debt grew 9% last year, CMHC says

In 2021, banks saw a 43% increase in new mortgages and a 22% increase in refinances compared to 2020.

The residential mortgage debt of Canadians recorded its fastest growth since 2008 last year, the Canada Mortgage and Housing Corporation (CMHC) said on Wednesday.

The federal housing agency pointed out that mortgage debt increased by 9% in 2021 compared to the previous year, and that its growth had crossed the 10% threshold in the first months of this year, before rising interest rates start to slow the market.

Household investment levels are quite high. It is therefore a source of vulnerability, said Tania Bourassa-Ochoa, senior economist at CMHC and co-author of the report on mortgage trends.

Banks saw a 43% increase in new mortgages and a 22% increase in refinances over 2020, resulting in a $400 billion increase in residential mortgages on their balance sheets, while credit unions credit have added $54 billion to their portfolios.

Activity in the housing market has slowed significantly in recent months, however, with central banks raising interest rates to curb inflation. On Wednesday, the Greater Toronto Real Estate Board reported a 41% decrease in residential property sales from a year ago, while those transactions fell 35% last month on an annual basis. in Metro Vancouver.

CMHC says variable rate mortgages have been increasingly favored over the past year as discounts to mortgages fixed interest rates were rising. Variable rate loans accounted for 53% of new mortgage borrowing in the second half, compared to 34% in the first half.

The increase in the number of variable rate mortgages means that more people are exposed to rising interest rates. The majority of these mortgages have fixed payments, so increases would mostly be felt at renewal.

Canadians who took out a new interest rate mortgage variable will be those who will feel the greatest and fastest increase, explained Ms. Bourassa-Ochoa.

Data from last year showed there were few indications of trouble with people making mortgage payments as high savings rates and a strong housing market had helped drive down delinquent mortgages, which fell for all types of lenders.

Examining inequalities in the housing market, the report noted that populations who identify as Indigenous, Black, Arab and Latino had homeownership rates significantly lower than the national average in the 2016 census – the latest data available at the time the authors were writing the report.

Homeownership rates were just under 50% for these groups, while the overall rate for Canada was 74%, and slightly higher for white and Chinese populations.

The report noted that when controlling for demographic factors, metro area and income, Indigenous, Black, Latino, Arab and Filipino Canadians have lower property values ​​than other Canadians, a gap that has increased since the 2006 Census. Since housing wealth is a strong indicator of economic success of future generations, the paper continues, any large gap between population groups is an indication that inequalities will persist in the future.

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