New mortgages fall to 18-year low as rates rise
September 22, 2023
Mortgage borrowing fell in the second quarter (Q2) of 2023 fell to its lowest level since 2020, and to its second-lowest level since 2003. Households borrowed $17.1 billion in funds in Q2, extending the trend of slower borrowing demand seen over the past three quarters.
The slowdown was driven by a marked decrease in demand for mortgage loans. Mortgage loans fell to their lowest point since 2005, according to Statistics Canada.
“Demand for mortgage loans fell amid the Bank’s two rate hikes in June and July,” said BMO economist Shelly Kaushik. “Looking ahead, elevated interest rates should continue to weigh on mortgage demand in the coming quarters.”
Canadian mortgage interest costs rocketed higher in Q2—soaring more than 80 per cent since the Bank of Canada started raising interest rates early in 2022.
On a quarterly basis, mortgage interest payments were up another 5 per cent to $92 billion in Q2, Statistics Canada reported. The pace of growth slowed from the double-digit pace seen during the four preceding quarters.
Mortgage holders are also paying more for interest than on the mortgage principal. Principal payments were down another 1.1 per cent in Q2 as “interest continued to account for a greater share of households’ total mortgage payments,” Statistics Canada noted.