Written by
penelope graham

As the Canadian real estate market hit new frantic highs over the course of 2021, it’s no surprise that the number of new mortgages taken out has also increased, but what’s perhaps surprising is that the age group of Generation Z (born between 1995 and the present) are consistently accounting for a larger share of those borrowers.

the TransUnion Credit Industry Report Fourth Quarter 2021 (CIIR) reveals that in the third quarter of 2021, the number of mortgage originations increased 5.6% year over year, and the share of Gen Z mortgage borrowers increased 30%, far outpacing any other age group. While it still represents only a fraction of the overall mortgage market at 4% (compared to 43% for Millennials and 37% for Gen Xers), it’s an interesting development given the way housing affordability has eroded in markets across the country. Overall, mortgage balances rose 11%, reflecting strong price growth, the report reveals.


TransUnion says that as home prices soared over the course of the fourth quarter, fueled by cheap lending rates and tight inventory, the average mortgage balance for individual consumers rose 10% year over year, at $320,835. This was especially prevalent in Ontario and British Columbia, where balances increased 22% and 19%, respectively.

Not surprisingly, this was concentrated in the most expensive urban centers: The average Torontonian who took out a home loan last quarter now has a 16% higher mortgage burden, at $580,470, while Vancouverites have a mortgage balance nearly $700,000, an increase of 13%. at $691,780. Additional consumer research from TransUnion’s Consumer Pulse survey shows that rising home prices are a barrier to home ownership for 44% of respondents.

Canadians have been better at paying down debt during the pandemic

However, despite taking on much larger portions of mortgage debt, consumers have been better at paying off their overall debt as delinquencies have been lower than expected for several quarters.

Credit card delinquencies (defined as 90 days or more delinquent on at least one credit card) increased by two basis points (bp), while personal loan delinquencies (60 days delinquent on at least one installment loan ) increased 9 bp in Q4. While it was the second straight quarter of increases, TransUnion says it’s a sign of recovery and a growing economy as consumers return to pre-pandemic credit behaviors.

Rate hikes will affect Canadians’ ability to pay

Of course, the cost of borrowing is now officially on the rise: the Bank of Canada announced its first rate hike since 2018, to 0.5%, this morning. Consumer lenders have already started to pass the higher benchmark onto their prime rates and, by extension, their variable rate products. As a result, adjustable-rate mortgage holders and those with lines of credit will see their payments increase, or less of their monthly payments will go toward their principal debt.

READ: More than half of Canadians can’t pay bills as inflation soars

Matt Fabian, director of research and consulting for financial services at TransUnion, says rising interest rates will cause a regression to pre-pandemic delinquency levels, though they are expected to remain at manageable levels for the foreseeable future.

“Mortgage lenders are now contemplating interest rate increases, which may increase rates for holders of Canadian variable rates, and this higher cost of debt may create additional stress on consumers’ wallets,” he says. . “Based on TransUnion’s previous payment hierarchy research, we traditionally don’t see this impact mortgage delinquencies, as consumers prioritize mortgage payments, but other payments, such as credit cards, may see an impact as that consumers manage the allocation of disposable income for debt coverage.

It is good news that Canadians are expected to continue to be cautious with their payments, as the data also reveals that overall credit appetite has indeed recovered to pre-pandemic levels, with the Credit Industry Indicator TransUnion (a measure based on demand, supply, consumption). behavior and performance) increasing 32 points year over year to 101.6. Total balance growth across all credit products increased 8.5%, driven primarily by non-revolving debt types, which include mortgages and term loans. Revolving debt types, which include credit cards, rose 2% as overall credit card spending rates rose 20% year-over-year as the economy reopened.

Says Fabian: “Canadian consumers have shown resilience, with increased savings aided by government and lender assistance programs, and the credit market has remained stable during the pandemic.”

Written by
penelope graham

Penelope Graham is the Editorial Director of STOREYS. She has over a decade of experience covering real estate, mortgage and personal finance topics. Her commentary on the housing market appears frequently in national and local media outlets, including BNN Bloomberg, CBC, The Toronto Star, National Post and The Globe and Mail.

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