Canadian households are dedicating more of their disposable income to mortgage payments than ever before, according to the latest data from Statistics Canada. In Q4 of 2022, Canadians spent 7.66% of their household disposable income on servicing their mortgage debt, up from 7.5% in the previous quarter and 7.09% in the same period in 2021, which is a record high since 1990. The average debt-to-service ratio also rose to 14.33% in Q4, up from 13.72% a year earlier. Although the rise in debt servicing costs was kept in check due to slowing debt growth and an increase in income, the debt servicing costs are expected to continue to rise rapidly throughout this year and peak in the second half of 2024.
The latest data release also showed that household borrowing continued to slow, with credit market borrowers adding $23.7 billion of debt in Q4, down from $33.7 billion in Q3, marking the slowest pace of borrowing growth since mid-2020. Moreover, variable-rate borrowing represented just 24.3% of new funds advanced versus fixed rate alternatives in the fourth quarter, compared with 53.5% for variable rate borrowing in the same period in 2021. Additionally, the value of household residential real estate declined by 1.4% (-$104.1 billion) from Q3 to Q4, and the total value of residential real estate in Canada was 6.8% lower than the start of the year but still 32.8% higher than the end of 2019.