mortgages in the first quarter of 2021 rose by 41.2 per cent from a year ago when the country was grappling with the first wave of the pandemic. In terms of the limit on new mortgages, meaning the amount for which borrowers were approved, stood at an average of CA$326,930 (US$270,490), which amounted to a 20 per cent increase from the same period last year.
This rise in the number and size of mortgages has led to a significant increase in consumer debt for the first quarter this year, which stood at a staggering CA$2.08 trillion (2.08 trillion), a 4.78 per cent increase from a year earlier and a 0.62 per cent increase from the final quarter of 2020.
“Lower interest rates, multiple lockdowns and higher unemployment rates have led to changes in consumer behaviour,” Rebecca Oakes, assistant vice-president of advanced analytics at Equifax, said in a press release accompanying the report. “Competition among home buyers is fierce in many markets across the country.”
Meanwhile, Equifax also revealed that as spending reduced during the pandemic consumers adopted healthier habits around daily spending. This, along with emergency income support from the government had enabled consumers to pay down their credit card debts, and as a result, credit card balances reached their lowest point in six years. “Across the board in all age groups, we’re starting to see people pay more than they actually spend on a credit card, which is a real positive behaviour change in terms of consumers,” Oakes said.
Nevertheless, consumers were noted to have relied on other sources of credit, such as home equity lines of credit, which saw a 60 per cent increase during the first quarter of this year. According to Oakes, since these types of loans are often at a variable interest rate, concerns arise if and when these interest rates go up. She further noted that as consumers continue to benefit from the government’s financial support schemes, mortgage and non-mortgage delinquencies are at a much lower rate than pre-pandemic levels, although she warned people to be prepared for a point of time when those supports subside.
“Successful vaccine rollouts will be the critical factor in opening up the economy, which will have a big impact on consumer spending and debt management,” she said. “Canadians should be preparing themselves for a point in time, which will likely come in this calendar year, when governments begin to rein in support mechanisms.”
