Mortgage Volumes Post Record Growth
Mortgage volumes posted their highest-ever rate of growth in the second quarter, driven in large part by historically low mortgage rates and a strong housing market.
Compared to the second quarter of 2020, mortgage volume was up over 60%, rising to 410,000 transactions, according to data from Equifax Canada.
Mortgage balances were up as well, pushed up by significant house price gains in the first half of this year. The average mortgage balance now stands at $355,000, up from $327,000 in the first quarter and a 22% jump from a year earlier.
“Apart from a strong housing market, seasonality and refinancing also played a big role in the new mortgage growth this quarter,” Equifax noted.
British Columbia in particular saw mortgage growth soar, rising nearly 86% over the previous year.
Home Equity Lines of Credit (HELOCs) also jumped during the quarter, rising nearly 57% year-over-year to a 10-year high.
“The HELOC trend is worrisome as often the payments are tied to a variable interest rate,” said Rebecca Oakes, AVP of Advanced Analytics at Equifax Canada.
However, the Bank of Canada has indicated repeatedly that it doesn’t expect to start increasing interest rates until the second half of 2022.
And a new forecast from the British Columbia Real Estate Association now sees the first rate hikes pushed out an extra year.
"We expect the Bank of Canada will proceed with caution, especially given the fourth wave of COVID-19," BCREA chief economist Brendon Ogmundson wrote.
"The unexpected contraction of GDP in the second quarter pushes out the closing of the output gap by one or two quarters,” he added. “That likely means a new timeline for the Bank of Canada to raise its policy rate with the earlier increase coming in mid-2023."
Delinquencies and Non-Mortgage Debt Falling
Despite concerns that delinquencies would rise as lenders wound down their mortgage payment deferrals at the end of 2022, the opposite has transpired.
The number of borrowers who are at least 90+ days past due on their mortgage payment declined by 32.6% in the quarter, Equifax reported.
“The consumer credit market continues to recover from the effects of the pandemic, with government support playing an important role in improving Canadians’ credit health,” Oakes said. “We’ll continue to monitor how increases in inflation and decreases in government incentives impact consumer debt levels and insolvencies over the coming months.”
Meanwhile, non-mortgage debt climbed by 7.4% in Q2 compared to the previous year. On an individual basis, however, debt per person was down by 1.6% to $20,640 per person.
Looking ahead, mortgage volumes are expected to remain strong with home sales forecasted to end the year about 20% above 2020 levels. Low housing inventories across the country should also keep pressure on house prices in most markets.