OTTAWA – Mortgages helped boost Canadian household credit growth in October as it increased by 5.0 per cent compared with a year ago, a report by the Royal Bank said Friday.
The increase came as mortgage borrowing rose 6.0 per cent compared with a year ago, the fastest pace since October 2012.
The Royal Bank put total household credit at $1.888 trillion, with home mortgages making up just over 70 per cent at $1.346 trillion.
“After recording a 5.4 per cent rate of growth for five consecutive months to kick off 2015, this component of household credit has gradually accelerated against a backdrop of accommodative borrowing conditions and strong housing activity in a handful of markets across the country,” Royal Bank economist Laura Cooper wrote in the report.
Meanwhile, growth in consumer credit slowed to 2.7 per cent, the slowest pace in a year. Personal loans, lines of credit, credit cards and other borrowing totalled $542 billion.
Rising debt levels has been identified by many, including the Bank of Canada, as a key risk to the economy.
The increase in mortgage borrowing comes at a time when questions are being raised about the strength of the Canadian housing market. While Toronto and Vancouver remain hot, other markets have started to feel the weakness in the economy.
And while variable rate mortgages remain low with the Bank of Canada holding its overnight rate target at 0.5 per cent, the popular five-year fixed offerings by many lenders have started to rise.
The Royal Bank report said the increase in household credit came as the growth in business credit eased as the pace of longer-term financing slowed.
Long-term financing, which included bonds, debentures, equities and warrants, rose 6.4 per cent in October compared with a year ago, compared with a 7.1 per cent increase in September.
Short-term business credit in Ontario rose 11.0 per cent compared with a year ago, down just slightly from 11.1 per cent in September.