Vancouver Households Non Mortgage Debt Rises 11.5% in Q4 2018

Steve Saretsky -

CMHC released their Q4 2018 report on mortgage and consumer credit trends. Maintaining our Canadian culture, The average mortgage loan value reached $209,570, a 3.1% jump from last year. This allowed household debt to continue growing quicker than incomes, and pushed the debt to income ratio to a record high 178.5% in the fourth quarter.

However, on a more positive note, the average balance for new loans actually declined 3.8% year-over-year, which is most likely the result of the mortgage stress test. Any wonder the IMF released a report earlier this week suggesting, “The government is under pressure to ease macroprudential policy or introduce new initiatives that buttress housing activity. This would be ill-advised, as household debt remains high and a gradual slowdown in the housing market is desirable to reduce vulnerabilities.”

Mortgage delinquency rates remain stable, suggesting a gradual slowdown may be entirely possible. Although, as we are sometimes quick to forget, mortgage delinquency rates are very much a lagging indicator and are generally not a great barometer for forecasting the future health of Canadian household balance sheets.

delinquency rates Canada
Delinquency Rates by City

There has been a substantial rise in the growth of the outstanding balance of non-mortgage debt, particularly in Vancouver. Existing mortgage holders in Vancouver saw non mortgage debt balances grow 11.5% year-over-year, suggesting households might be coming under pressure and are borrowing from lines of credit or credit cards to service existing debts.

non mortgage debt growth
Non-Mortgage Debt Growth by City.

This shouldn’t be overly surprising given the ability to refinance your home in Vancouver is becoming increasingly more difficult. Especially since homeowners lost an apparent $89 million in home value in 2018, at least according to an analysis commissioned by the anti-speculation tax and anti-school tax group ‘StepUp Now’.

equity lost
Equity lost in 2018 by municipality.

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022