Slower Canadian real estate sales are putting a drag on mortgage credit growth. Bank of Canada (BoC) numbers show outstanding mortgage credit reached a new record high in April. The new record came with stalled growth, but there were some signs a small bump could be on the way.

Canadians Owe Over $1.56 Trillion In Mortgage Debt

The balance of mortgage debt at institutional lenders reached a new all-time high. The outstanding balance reached $1.56 trillion in April, up 0.17% from the month before. This represents an increase of 3.2% from last year. The balance reached a new record high, but the pace of growth is still looking very weak.

Canadian Outstanding Mortgage Credit

The outstanding balance of Canadian mortgage credit.

Source: Bank of Canada, Better Dwelling.

The annual pace of growth stalled, but is much lower than Canadians are used to seeing. This is the third consecutive month the annual pace of growth printed 3.2%. Outside of this period, only two months have printed lower numbers in the past three decades. Compared to the same month last year, the annual pace of growth is down 31.91%. That’s an impressive decline, considering how slow mortgage borrowing was last year.

Look Forward To Minor Growth… At Best

Annualizing growth is one method used to forecast where a trend is heading. Analysts do this by measuring a short period, and projecting it as though it were the whole year. Since the 12 month trend can’t grow without larger near-term numbers, it’s helpful to watch them for signs of growth. The shorter annualized period needs to be larger long enough to “drag” the 12 month growth higher.

Annualizing two recent periods, we get mild growth tapering towards flat growth. The 3 month annualized pace of growth fell to 3.5% in April, 10% lower than the same period last year. That would mean small growth may be coming, but the more recent one month annualized pace fell back to 3.2% in April. Unless it bounces higher the following month, we could see it stay flat or even fall soon.

Canadian Outstanding Mortgage Credit Change

The 12 month percent change, and 3 month annualized change, of outstanding Canadian mortgage credit at large institutional lenders.

Source: Bank of Canada, Better Dwelling.

Canadians are pushing new record highs for mortgage debt, but the pace of growth is tapering. Any growth is better than none, but numbers this low is something Canada doesn’t have a lot of experience with. Other than this recent period, this generation has only seen growth this low for two months. After which, the BoC cut rates to stimulate growth. Of course, that was back when debt levels weren’t the highest of the advanced economies.

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