Canadian households are once again embracing the convenience of home equity loans, marking a significant shift in borrowing habits. Statistics Canada data reveals a steady increase in the balance of home equity line of credit (HELOC) accounts, indicating a resurgence in borrowing activity after a period of reluctance due to higher interest rates and stricter lending criteria.
Canadian HELOC Debt Hits The Highest Level In Nearly 2 Years
- The balance of HELOC debt owed by Canadian households has reached a peak, totaling billions of Canadian dollars.
- This resurgence in borrowing reflects a 3.0% increase compared to the previous year, with the balance now at its highest level in almost two years.
Canadian households have propelled their HELOC balances to $170.8 billion in September, marking a 0.4% increase (+$720 million) from the previous period. This growth trend signifies a 3.0% rise (+$5.0 billion) year-over-year, reaching levels not seen since November 2022.
Canadians Are Racking Up HELOC Debt At A Much Faster Rate Than Usual Once Again
- The annual growth rate of HELOC debt among Canadian households has accelerated in recent months.
- After a prolonged period of sluggish growth, the annual rate surged to 3.0% in September, demonstrating the highest level of growth since October 2022.
Despite a temporary slowdown in HELOC borrowing, the recent resurgence in activity has been notable. Positive annual growth, a rare occurrence in the past five years, has caught the attention of market observers. This uptick in sentiment towards real estate-secured loans is a departure from previous trends and may warrant further scrutiny in the near future.
Canadians Are Opting For HELOC-Like Debt Instead of HELOCs
Canadian borrowers are diversifying their debt portfolios, favoring alternative forms of real estate-secured loans over traditional HELOCs. This shift in preferences is evident in the increased utilization of non-mortgage consumer loans secured with residential real estate, particularly from federally regulated financial institutions (FRFIs).
Total outstanding balances for these loans have surged to $325.23 billion in September, marking a significant 3.2% increase (+$9.95 billion) compared to the previous year. This trend indicates a growing appetite for HELOC-like loans, which offer distinct advantages over traditional HELOCs.
While rising interest rates initially dampened borrowing activity across various segments, the recent revival of cheap credit has reignited interest in HELOC borrowing among Canadian households. This resurgence, coupled with a renewed bullish sentiment in the real estate market, has propelled HELOCs back into the spotlight, mirroring the growth trajectory of residential mortgages.
As this trend continues to gain momentum, regulators may turn their attention towards monitoring the evolving landscape of real estate-secured lending, ensuring sustainable borrowing practices among Canadian households.
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