Consumer debt continued to rise in Q4 but new mortgages declined: Equifax

The number of new mortgages declined 8.1 per cent year over year in the last three months of , according to Equifax.

Canadians took out fewer new mortgages even before interest rates began to rise last week, but consumer debt continued to increase in the fourth quarter, Equifax said in a report.

The company said Monday the number of new mortgages fell 8.1 per cent year over year in the last three months of 2021. The biggest drop was in some of the country’s hottest housing markets with Toronto and Hamilton falling 16.1 and 18.7 per cent, respectively.

“There’s no question that skyrocketing house prices have decreased housing affordability across all segments,” said Rebecca Oakes, assistant vice-president of advanced analytics at Equifax Canada in a news release.

“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 Bank of Canada hiked its benchmark rate by a quarter of a percentage point to 0.50 per cent last week with more increases expected later this year.

The average new mortgage loan increased 10.1 per cent from the fourth quarter of 2020 to $355,000, but dropped 1.5 per cent from the third quarter for the first decrease since the pandemic began.

Oakes said this may be a sign of average home prices stabilizing, although continued demand and lack of supply could lead to further rises in the property prices.