Canadians choosing longer amortization periods as mortgage debt hits record highs

May 25 2023, 8:01 pm

Canadians are buying homes at a slower rate, but mortgage debt has climbed to new heights.

According to Canada Mortgage and Housing Corporation’s (CMHC) newest Residential Mortgage Industry Report, residential mortgage debt stood at $2.08 trillion in Canada in January this year. This shows a whopping 6% increase in debt compared to January 2022.

CMHC attributes the slowdown in homebuying to inflation, rapidly rising interest rates, and cooling housing markets across the country, which “weakened consumer confidence” in 2022.

Statistics Canada | CMHC

Earlier this week, CMHC released an analysis revealing that Canada now has the highest level of household debt among G7 countries, making the economy more vulnerable to any global economic crisis, according to a new report. Mortgages were deemed one of the central culprits in this trend.

Tania Bourassa-Ochoa, senior specialist of housing research for CMHC, said that these trends raise questions around housing affordability — notably, the ability of Canadian households to make their monthly debt payments.

“Although mortgages in arrears remain low, they are a lagged indicator, and in challenging financial situations, consumers will typically be delinquent on credit cards, lines of credit, or auto loans before mortgages,” said Bourassa-Ochoa. “Increasing delinquencies for these credit products indicate a larger number of consumers are having difficulties with their debt payments.”

Mortgage trends at a glance

In their research, the experts at CMHC noted emerging trends in the Canadian real estate market concerning mortgage and debt. For example, they found that mortgage borrowers choose shorter-term fixed-rate mortgages, hoping that interest rates will take a nosedive in the future.

Fixed-rate five-year mortgages have also fallen to less than 15% of new mortgages. CMHC says many consumers are opting for fixed two- to three-year rates. Meanwhile, variable-rate mortgages are also dropping to less than 20% of new mortgages.

Statistics Canada | CMHC

A massive decline in refinancing has also been observed as debt gets more expensive — the latest data shows a 32% drop in refinances.

Due to these pressures, mortgage borrowers choose longer amortization periods, thus increasing their paydown period but lowering their short-term mortgage payments.



CMHC Deputy Chief Economist Aled ab Iorwerth found that household debt in Canada has been rising “inexorably” compared to other countries.

“At the time of the recession in 2008, it stood at about 80% of the size of the economy; in 2010, it rose to 95%, and by 2021 debt exceeded its size,” he said.

What does the future hold?

Despite sky-high interest rates, swelling mortgage debt, and extended amortization periods, Canada’s real estate investors are not over the craze of owning an investment property.

According to a new report from Royal LePage, more than one-in-four Canadians (26%) plan to buy an investment property between now and 2028. Royal LePage surveyed 1,003 Canadian adults in March this year.

Of those surveyed, 11% — about 4.4 million — already own a property; among that group, more than half plan to buy an additional investment property.

Meanwhile, 23% of those who don’t currently have an investment property to their name want to own one in the next five years.

Royal LePage’s observations show that 44% of real estate investors own single-family detached homes, maintaining their position as the most popular investment property nationwide.

Condos follow in the second position (37%) and townhomes in the third (11%).

That said, Phil Soper, president and CEO of Royal LePage, notes that higher mortgage rates and the increased cost of home maintenance and utilities have “prompted some over-leveraged investors to consider selling.”

Amid financial pressures that challenge the country, do you see yourself buying a residential or investment property in Canada over the next five years? How do you see these trends affecting the rental market?

Let us know your thoughts in the comments.

With files from Daily Hive’s Isabelle Docto

Imaan SheikhImaan Sheikh

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