Mortgage debt is growing at its slowest pace in 23 years — but that could be short-lived, says CMHC

Higher home sales and prices forecast in the coming years.
Mortgage debt grew at its slowest pace in 23 years in February, amid high borrowing costs and reservations related to the Bank of Canada’s key interest rate — but the slowdown likely won’t last, according to Canada’s housing agency.
Canadian mortgage debt totalled $2.16 trillion that month, up 3.4 per cent from the same period last year — a historically low growth rate, according to a report from Canadian Mortgage and Housing Corporation (CMHC). High interest rates and uncertainty over the central bank’s plan to lower its key interest rate led to fewer home sales and softer prices across many regions.
Tu Nguyen, an economist with RSM Canada, says it’s not surprising that housing market activity has slowed down.
“Households are really being squeezed by high inflation and high interest rates. It’s also a waiting game, as prospective homebuyers are waiting on the sideline for the Bank of Canada to cut rates,” she told CBC News.
However, she agrees with the agency’s expectation that the slowdown in mortgage growth could be short-lived, with higher home sales and prices forecast in the coming years.“Once the Bank of Canada begins cutting rates, which is as early as next week, we will see mortgages growing again,” she said. The Bank of Canada’s next interest rate announcement is on June 5. According to the CMHC’s report, that anticipated decline in mortgage rates, along with population growth and increases in disposable income after tax and inflation, will likely fuel the turnaround.
“In a context where debt levels have never been so elevated and households are showing increasing warning signs of financial struggle, household debt vulnerability is becoming a primary area of concern,” said CMHC deputy chief economist Tania Bourassa-Ochoa in a news release.
“As homeowners find it more difficult to manage their monthly budgets, policymakers and the financial sector are on high alert when considering risks to the financial industry and the economy.”
Source:cbc.ca/news