Mortgage growth in Canada slowed year-on-year in January due to inflation, but debt rose 6%.
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That’s the conclusion of CMHC’s latest Residential Mortgage Industry Report.
As of January 2023, residential mortgage debt in Canada was $2.08 trillion. High inflation, rapidly rising interest rates and declining property markets across the country have resulted in fewer people wanting to buy property, the report said.
“With mortgage debt at record levels and the cost of living rising, one wonders whether Canadian households will be able to pay off their debt each month. […] In difficult financial situations, consumer accounts tend to be behind on credit cards, lines of credit and pre-mortgage auto loans,” said Tania Bourassa-Ochoa, senior housing research specialist at the CMHC.
According to the report, as interest rates rise, consumers are choosing options that allow them to lower their monthly debt service costs.
For example, mortgage borrowers choose short-term fixed-rate mortgages in anticipation of lower interest rates in the future.
Five-year fixed-rate mortgages now account for less than 15% of new mortgages. Adjustable rate mortgages accounted for less than 20% of new mortgages, it said.
Also, as debt costs rise, fewer mortgage borrowers are applying for refinance. The data also shows a 32% drop in refinancing in 2022.