HELOC Crazy Canadians Are Cooling Their Borrowing Sprees


Don’t worry, Canadians are still using their homes as ATMs. Office of the Superintendent of Financial Institutions (OSFI) filings show a new debt record in April. The balance of loans secured by residential real estate reached an all-time high. While the segment of debt is slowing in growth, it’s growing faster than national home prices.

Loans Secured By Residential Real Estate

Loans secured by residential real estate are when people pledge their home as collateral. By “securing” their loans, they can borrow at lower rates and face less income scrutiny. The number is often used by government as a proxy to measure home equity lines of credit (HELOC) debt. Boring – you know, Canadians are up to their neck in debt. The takeaway isn’t the balance itself, but the type and movement. These indicators give us some insight into consumer behavior.

The numbers are broken down into two major segments, personal and business. Personal loans secured by real estate are great for banks, but a sign of consumer leverage. Some leverage is re-invested, but banks pitch them as home renovation or vacation funds. Either way, an increase in consumer leverage makes them more vulnerable to shock.

Business use differs, because home equity is often required for small business loans. When this segment increases, it’s considered a good thing. If people are borrowing for small businesses, they’re hopefully confident in consumers. People generally don’t start or expand businesses when they’re anxious about the economy. In an ideal scenario, personal use is at stable and low growth, and business use is rising.

Canadians Secured Over $299 Billion In Loans With Property

The balance of loans secured with residential real estate reached a new all-time high. The balance hit $299.6 billion in March, up 0.21% from a month before. The annual pace of growth works out to 5.25%, making it the smallest March since 2016. The vast majority of this growth was in the personal use segment.