HELOCs accounted for the vast majority of Canadian home equity drawn last year, according to the Bank of Canada.
Data from the central bank showed that over the past six years, Canadians have extracted approximately $477.5 billion in home equity.
And while the $83.1 billion volume in 2018 was 6.62% lower than the year prior, the overall annual level has never been lower than $80 billion since 2015.
Of this sum, HELOC credit represented as much as $46 billion, across nearly 1.9 million accounts (4.43% fewer annually).
Meanwhile, $37.1 billion was through refinancing, with 296,000 homeowners taking advantage of this extraction (down 10.27% year-over-year).
The sheer volume of home equity used by Canadians over the past few years has helped strengthen consumption and the economy, but the trend also has potentially disastrous effects, market observers warned.
The danger particularly intensifies when people continue to extract home equity while home prices grow.
“This is a problem if the collateral effect contributes meaningfully. If home prices fall, the equity-based spending disappears. Combine that with slower sales, which leads to lower spin-off economic activity,” Better Dwelling reported in its analysis of the BoC figures.
“A decline in home prices is no longer just a hit to paper-based wealth. It has a significant impact on the general economy, and employment.”