Consumer debt is down sharply because consumers have been borrowing less and have been paying down lots of debt. Since March, consumers have been borrowing between $20 and $15 billion CAD each month, but they’ve been paying down between $20 and $25 billion CAD each month at the same time. In July, we see that consumer credit issuance is down over 11% from the same time last year, but credit destroyed (or paid down) is down only 8%.
We’re seeing a similar thing happen in the business credit market. Businesses are borrowing less and have substantially increased their debt repayments. In July, credit issuance was down over 5% from the same time last year, but credit destroyed up is over 20%! If this trend continues, the bank business credit market will be in contraction before the of the year. This will have profound implications for the labor market.
Finally, all appears to be well in the mortgage and real estate market except when we start to look at the credit issuance/destruction data. In July, residential mortgage credit issuance was down over 2% from the previous year. July is normally a month when we see mortgage credit issuance the highest. So it appears that things may be beginning to slow down in the mortgage credit market on a year-over-year basis.
Luckily mortgage holders have been paying down
debt this year, thanks to mortgage deferral programs. On a year-over-year basis, residential mortgage credit destruction is down almost 2%. This is likely holding outstanding residential mortgage credit levels up. A big question now is, what will happen in this market when deferral programs end and credit issuance drops in the winter due to seasonal factors when people are buying fewer homes?