mortgage credit growth Canada

Residential Mortgage Credit is Growing Faster than Before the Mortgage Stress Test

Steve Saretsky -

There’s been lots of talk about a bounce in Canadian housing and certainly recent data suggests that is the case. That doesn’t mean risks have disappeared, merely it seems a recent easing in global monetary policy has provided a lift to many asset classes, including housing.

The plunge in bond yields has spurred an increase in household borrowing. Canada’s Residential mortgage credit growth on a 3 month annualized pace has accelerated to 5.74% in October. It is now growing faster than it did prior to the introduction of the B-20 mortgage stress test.

mortgage credit growth Canada
Residential mortgage credit growth in Canada.

That will certainly damper further suggestions to tweak or abolish the mortgage stress test. Mortgage credit is accelerating and that should provide momentum for house price growth. Per Capital Economics, local Real Estate board data for Toronto & Vancouver show big gains in the sales-to-new listing ratios in November. This suggests the national ratio reached 65.0, almost surpassing 2017 levels and pointing to very strong house price inflation nationwide.

Perhaps this is just a false positive, it’s certainly hard to fathom what would propel house price inflation into double digit territory, baring another inflow of foreign capital.

One things for sure, this will keep policy makers up at night. No doubt adding to the reason the Bank of Canada has refused to cut rates so far. The prolonged pause has left Canada with the highest policy rate among advanced economies.

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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...

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The Saretsky Report. December 2022