Fewer Canadians are signing up for new mortgages.
According to insights in Equifax Canada’s quarterly Market Pulse report, new mortgage growth fell 8.1 per cent between Q4-2020 and Q4-2021. The largest drops in new mortgages were detected in some of the country’s most expensive housing markets, according to a press release. In Toronto and Hamilton, for instance, new mortgages were down 16.1 per cent and 18.7 per cent year-over-year in Q4-2021.
“There’s no question that sky-rocketing house prices have decreased housing affordability across all segments,” said Rebecca Oakes, assistant vice-president of advanced analytics at Equifax Canada, in the release.
“In addition to high house prices, lenders have also started to move interest rates up in anticipation of rate rises from the Bank of Canada. This could also be limiting the purchasing capacity of many consumers,” she added.
Last quarter, the average loan amount for new mortgages was up, climbing 10.1 per cent between Q4-2020 and Q4-2021. However, loan amounts were down compared to Q3-2021, falling 1.5 per cent from quarter-to-quarter. This marks the first time that average loan amounts for new mortgages have reported a quarterly drop since the COVID-19 pandemic began, according to Equifax Canada. As of Q4-2021, the average loan amount for new mortgages is at $355,000.
Oakes pointed out that this may be an indication that average home prices are stabilizing, but additional market demand and chronic supply shortages could continue to push prices higher.
Mortgage delinquencies stay low, but consumer debt is up
Mortgage delinquencies — when a borrower fails to make payments — continued to fall in Canada as overall debt trended upward last quarter.
Mortgage delinquencies equaled 0.11 per cent, dropping 31.8 per cent annually. By comparison, Equifax Canada reported non-mortgage delinquencies to be 0.86 per cent, down 20.7 per cent year-over-year.
Certain products noted a small increase in delinquency, such as the 90-plus day delinquency rate for credit cards and non-bank auto delinquencies, which rose 2.7 per cent and 14.7 per cent from Q3-2021 to Q4-2021.
“High inflation is impacting how far a dollar stretches day-to-day for consumers,” said Oakes. “Delinquencies are likely on the upswing for the immediate future when you layer in the pull back of government support and COVID-19 restrictions still hurting businesses.”
Now, overall consumer debt is $2.2 trillion as of Q4-2021, up 7.9 per cent from the same quarter last year. On an individual basis when excluding mortgages, the average consumer debt is $20,686, down 0.6 per cent when compared to Q4-2020.
Falling auto and instalment loan debt have been the biggest factors driving down average debt this quarter, explained Oakes. In addition to a seasonal decline in demand, delays in vehicle deliveries as a result of supply chain issues has slowed down new auto growth.
“Overall average debt is low, but a small increase in average debt is visible across certain segments,” said Oakes.
Credit card spending continues to soar
Using credit cards for spending recently reached a high.
Total consumer credit card spending is up 14.4 per cent from Q4-2020 and has increased 9.8 per cent from Q3-2021. On average, Canadians have an average monthly credit spend per credit card of $2,205, up 15.2 per cent from the same period last year and 6.8 per cent when compared to the pre-pandemic period of Q4-2019. Higher spending has also been reflected in overall credit card balances, which are up 2.4 per cent when compared to Q4-2020
“The holiday period always leads to an increase in spending, but Q4 2021 saw higher than ever average credit card spending per credit card consumer,” said Oakes. “Consumer payment behaviour is slowly getting back to pre-pandemic levels as disposable income from government benefits depletes, but consumers are making less payment for every dollar spent compared to the same time period last year.
