Household debt rises in the face of rate hikes

Despite rising interest rates, household borrowing continued to rise in March, according to new data from Statistics Canada.

The national statistical agency reported that overall household borrowing rose by 0.5% in March, up $14.4 billion to $2.69 trillion.

The vast majority of the increase, $13.2 billion worth, came in debt linked to the real estate market (mortgage borrowing and home equity lines of credit (HELOCs)), which totalled $2.16 trillion in outstanding debt.

StatsCan said that mortgage debt grew by 0.6% in March, an increase of $12.7 billion to just under $2 trillion ($1,989.5 billion). On a year over year basis, mortgage debt was up 10.5% in March.

The increase in mortgage borrowing came in the wake of a rate hike by the Bank of Canada at the start of March (to 50 basis points), and a further increase in April to 1.0%.

At the same time, non-mortgage debt grew by $1.7 billion (an increase of 0.2%) in March to a total of $704.5 billion.

Credit card debt at the banks rose by 0.9% in the month (an increase of $727 million).

While this was the second consecutive monthly increase in credit card debt, StatsCan noted that credit card balances remain below their pre-pandemic levels, down by roughly $9 billion from their level at the end of 2019.

The increase in credit card debt came amid a strong rise in retail sales in the month, the report noted.

“An advance estimate of retail sales indicated growth of 1.4% in March, following a 0.1% increase in February,” it said.

Additionally, the agency reported that HELOC balances rose by 0.3% ($510 million) in March to $167.3 billion.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.