According to the latest report from Canada Mortgage and Housing Corporation (CMHC), residential mortgage debt in Canada reached $2.08 trillion in January, marking a 6% increase compared to the previous year.
While inflation and higher interest rates had an impact on mortgage borrowing, the rate of growth for mortgage debt has slowed in recent years, as highlighted in the CMHC report. Borrowers have been adapting their borrowing habits to navigate the effects of higher interest rates. Notably, there has been a shift in preference towards shorter-term fixed-rate mortgages, while the popularity of five-year and variable-rate options has decreased.
Variable-rate mortgages, which experienced a surge in popularity during the COVID-19 pandemic, accounted for less than 20% of new mortgages at the beginning of this year. Meanwhile, five-year fixed-rate mortgages comprised 15% of the market share.
CMHC emphasized that increasing consumer debt remains a “systemic risk.” Some households face challenges in repaying their debts. However, the report also indicated that alternative lenders have maintained a relatively low risk profile, despite their increased market share. These lenders have adopted more conservative lending practices in the current uncertain economic climate.
CMHC further observed that more mortgage borrowers are turning to alternative arrangements when renewing their loans, as qualifying for conventional mortgages continues to pose difficulties for some individuals.