Canadian real estate owners borrowed another billion of their home equity. Office of the Superintendent of Financial Institutions (OSFI) numbers show the balance of loans secured by home equity hit a new record in October. The balance, which is slowing in growth, is primarily consumers borrowing for personal consumption.
Loans Secured By Residential Property
Loans secured by residential real estate are when a borrower pledges a home as collateral for a loan. Securing debt with real estate allows borrowers to get both cheaper and larger loans. The most popular form of debt issued this way is a home equity line of credit (HELOC). Regulators like to split the category into two segments, personal or business.
Personal and business loans secured by home equity are done the same way, but mean different things. Personal loans are generally for consumption, meaning the cash is mostly gone. Banks pitch consumers on these loans for vacations or suggest using it as a downpayment on a second home. Business loans are routine, since new companies often need a personal asset guarantee. Seeing growth in personal loans means people need short-term cashflow assistance to consume. That’s generally a bad thing. Seeing a rise in business loans means businesses are confident in expanding, which is a good sign. We want to see low growth in personal, and high growth in business ideally.
Total Debt Secured By Home Equity Rises To Over $294 Billion
The total of debt secured by residential real estate hit a new record. The outstanding balance of these loans reached $294.16 billion in October, up 0.63% from the month before. That’s an increase of 4.5%, when compared to the same month last year. We’re still seeing substantial growth, but it’s a lot slower than last year.
Total Loans Secured With Residential Real Estate
The total of personal and business loans, secured with residential real estate.
Source: Regulatory Filings, Better Dwelling.
The total growth rate is still high, but a lot lower than last year. Last year this time, we saw the 12 month pace of growth hit 9.03% in October. That puts the growth rate at 50% lower than the same month last year.
Personal Loans Secured By Home Equity Rise To Over $264 Billion
The vast majority of loans secured by home equity are for non-business purposes. The outstanding balance in this segment reached $264.76 billion in October, up 0.55% from the month before. That’s an increase of 6.12%, when compared to the same month last year. Personal loans in this segment have hit a new record, but the pace of growth is starting to taper lower.
Personal Loans Secured With Residential Real Estate
The total of personal loans, secured with residential real estate.
Source: Regulatory Filings, Better Dwelling.
October’s growth rate is down from the same time last year, and following a trend of slower growth. The 6.12% 12 month change in October is slightly lower than the month before. It’s also 2.08% lower than the same month last year. That said, the rise in the cost of servicing these loans should have reduced the pace of growth much more.
Business Loans Secured By Home Equity Falls To $29 Billion
The balance of business loans secured by home equity is falling. The outstanding balance fell to $29.402 billion, up 1.39% from the month before. The outstanding balance is now down 8.12%, compared to the same month last year. Unfortunately, the segment that we want to see growth in, is falling the fastest.
Business Loans Secured With Residential Real Estate
The total of business loans, secured with residential real estate.
Steve is a award winning Realtor in Victoria BC, with his listings selling faster and for top dollar! Growing up in Victoria, BC and has always been active in his community. Steve is a Victoria Couga....
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