Here’s why Canada’s appetite for mortgage debt doesn’t signal another housing crash

Dated: December 27 2018

Views: 46

Photo: James Bombales

Canadians today are having to spend the highest share of their disposable incomes on mortgage payments since the early-’90s, when the market was reeling from a collapse in prices.

That may lead some to speculate history is about to repeat itself, but a Hot Charts report from National Bank notes a key difference this time around.

“Back in the early 1990’s, interest accounted for the bulk of mortgage payments. But as today’s Hot Charts show, capital repayments now account for almost half of mortgage payments,” writes Krishen Rangasamy, a senior economist at National Bank.

Housing Market News Alerts

Sign up now for news alerts on the Canadian housing market

The upshot is borrowers are building equity, and therefore in a better position to shoulder shocks.

“That’s not to say we’re complacent about downside risks to the Canadian economy,” Rangasamy adds, noting higher debt servicing, rising interest rates, and fading real estate wealth are expected to hinder economic growth next year.

The National Bank report came on the heels of the publication of Statistics Canada’s third quarter national balance sheet and financial flow accounts.

According to the national statistical agency, Canadians are directing 14.5 percent of household disposable incomes towards debt servicing, which includes both interest and principal payments.

“Blame higher borrowing costs for this increase because interest payments now account for 7.2% of disposable income, a multi-year high,” says Rangasamy.

Total mortgage loans owed by borrowers in Canada declined by $1.2 billion, representing the third quarterly decline in a row.

More Like This

Blog author image

Steven Axford

Steve Axford grew up in Victoria, BC and has always been active in his community. Steve is a Victoria Cougars Hockey Team alumni as well as a Victoria Shamrocks (intermediate) alumni. During his time....

Latest Blog Posts

Don’t Wait To Sell Your Home

We’re in the ultimate sellers’ market right now. If you’re a homeowner thinking about selling, you have a huge advantage in today’s housing market. High buyer demand paired

Read More


The city of Miami in the sunshine state of Florida is one of the most attractive residential markets in the world. Regarded as the financial capital of Latin America, Miami ranks as the third

Read More

The Impact on Borrowers

Starting June 1, both insured and uninsured mortgage borrowers will be subject to a stricter stress test when qualifying for their mortgage.The Office of the Superintendent of Financial(

Read More

Unwavering demand reinforces need to support supply of homes

June 1, 2021 The Victoria market continued to show its strength through the month of May, with a near record setting pace for sales and ongoing record low inventory levels. A total of 1,049

Read More