New report shows significant drop in new mortgages in Canada

Credit card spending higher than ever

By Saeed Akhtar, The Milton Reporter
New mortgages growth saw an 8.1 percent decline across the country in Q4 2021 when compared to Q4 2020, according to Equifax Canada’s most recent Market Pulse consumer credit trends and insights report, amid an increasing demand of credit cards.
The biggest drop in new mortgages was seen in some of the hottest housing markets like Toronto and Hamilton with a 16.1 percent and 18.7 percent drop respectively when compared to Q4 2020.
“There’s no question that sky-rocketing house prices have decreased housing affordability across all segments,” said Rebecca Oakes, AVP of Advanced Analytics at Equifax Canada. “In addition to high house prices, lenders have also started to move interest rates up in anticipation of rate rises from the Bank of Canada. This could also be limiting the purchasing capacity of many consumers.”
The average loan amount for new mortgages shows a 10.1 percent increase in Q4 2021 when compared to Q4 2020 but it has dropped by 1.5 percent when compared
to the previous quarter Q3 2021. This is the first time that the average loan amount for new mortgages has shown a quarter-over-quarter drop since the pandemic began.
Oakes noted this may be a sign of average home prices stabilizing. However, continued demand and lack of supply could lead to further rises in the property prices. The average loan amount for new mortgages is at $355K as of Q4 2021.
Meanwhile, total consumer credit card spending was up by 14.4 percent when compared to Q4 2020 and 9.8 percent from the last quarter. The average monthly credit spend per credit card consumer is now $2,205, up by 15.2 percent this quarter when compared Q4 2020 and up by 6.8 percent when compared to the pre-pandemic period Q4 2019.
“The holiday period always leads to an increase in spending, but Q4 2021 saw higher than ever average credit card spending per credit card consumer,” said Oakes. “Consumer payment behavior is slowly getting back to pre-pandemic levels as disposable income from government benefits depletes, but consumers are making less payment for every dollar spent compared to the same time period last year.”
Consumers are paying $0.96 for every dollar spent, which is down by 2.9% when compared to Q4 2020. Higher spend is also reflected in overall credit card balance which was up by 2.4 percent when compared to Q4 2020.
Credit card demand is increasing again with new card growth finally reaching pre-pandemic levels. The average credit limit on new cards has risen by 23.2 percent from Q4 2020 ($4,966) due to higher demand and lender confidence, the Equifax report added.