Low lending rate spurs record mortgage debt

January 29, 2021

Total residential mortgage debt in Canada ballooned to $1.66 trillion as of December 2020 as homebuyers and homeowners continued to pounce on the lowest mortgage rates in 100 years.
Statistics Canada reported that the surge was accompanied by a sharp spike in mortgage loans, which reached a new high of $28.7 billion during the third quarter of 2020.
Dan Eisner, CEO of True North Mortgage Inc., said these developments should not come as a surprise considering the second half of 2020 comprised “some of the busiest months we’ve ever had in the mortgage industry.”
“I’ve never seen the intent to buy as high as it is right now,” Eisner told The Financial Post. “There are a lot of Canadians who are looking to upgrade their house or just looking to buy a home for the first time.”
On January 20, 2021, the Bank of Canada kept its benchmark overnight lending rate at 0.25 per cent. This translated into rock-bottom mortgage rates, according to RateSpy, which reported five-year term rates as low as 1.3 per cent on January 22.
Some economists see Canada’s housing market continuing to rocket into 2021 after posting near-record high sales and prices in 2020, despite the pandemic.
“We see little that will stop activity or prices from reaching new highs in 2021,” said Royal Bank economist Robert Hogue. “Historically low interest rates, changing housing needs, high household savings and improving consumer confidence will keep demand supercharged. A dearth of supply will maintain the heat on prices.”