This credit product has begun showing signs of prolonged sluggishness

by Ephraim Vecina on 30 Oct 2019

Canadian home equity lines of credit are now showing marked symptoms of a long-term slowdown, if the latest figures from the OSFI are any indication.

The nation’s outstanding HELOC balance increased by 4.27% annually in August, ending up at $303.41 billion. However, this was just 0.08% higher on a month-over-month basis.

Moreover, “the 12-month growth in August is the fourth consecutive month of deceleration. The trend has been towards lower since April, and is now at the lowest level of growth since July 2018,” housing information portal Better Dwelling explained in its analysis of the OSFI data.

This slowdown is especially apparent in HELOCs for personal loans, the balance of which went up by just 3.06% annually to reach $270.07 billion in August. This was also a mere 0.15% higher from July.

At the same time, HELOC payments continue to outpace every other debt type in Toronto and Vancouver, according to figures from Equifax and Canada Mortgage and Housing Corporation.

During Q1 2019, the average HELOC payment in Toronto went up by 14.48% annually, reaching $593 per month. This was far greater than the growth seen in the market’s mortgage payments, which increased by just 5.42% year-over-year to settle at $1,752 per month.

In Vancouver, HELOC debt servicing rose by 12.29% annually in Q1 2019, settling at $667 per month. This rate was almost three times the speed of mortgage payment growth, which significantly trailed at just 4.85%, reaching $1,881 per month.

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