September 20, 2020

Don’t expect big mortgage slowdown anytime soon: BMO economist

John Greenwood Dec 15, 2011 – 5:53 PM ET | Last Updated: Dec 15, 2011 5:55 PM ET

The global financial system is once again coming unstuck but Canadians are still racking up debt like there’s no tomorrow.

We know this because Statistics Canada, which keeps track of such things, reported earlier this week that the ratio of household debt to income has climbed above 150%, which according to many observers should set off alarm bells.

By far the biggest component of household borrowing is mortgages. If you want to get your head around the problem, this is the part you need to look at. Doug Porter, deputy chief economist at the Bank of Montreal, published an interesting note on Thursday showing that despite warnings from Bank of Canada Governor Mark Carney and a slew of other policy makers, our appetite for new homes remains undiminished, with total mortgages growing at 7%-plus a year.

That works out to more than three times expected GDP growth for this year. Worryingly, mortgage debt has been growing at or above that rate for the better part of a decade.

“The biggest single driver of mortgage growth is the path of home prices,” said Mr. Porter, who added that home prices are up about 5% this year. “Unless and until home prices truly crack, don’t expect a big slowdown in mortgage credit growth.”


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