The volume of new mortgages across Canada has been slowing down in recent months, amid rising interest rates and tougher federal regulations, a new TransUnion report shows. But the country’s oldest homeowners are bucking that trend – big time.
Among Canadians aged 73 to 93, the so-called silent generation or pre-war generation, the number of mortgages issued between January and March of 2018 was up a whopping 63 per cent compared to the same period last year, TransUnion data shows. Baby boomers are also getting new mortgages, although the increase in loan originations among Canada’s 54- to 72-year-olds is a more modest 18 per cent.
That stands in stark contrast with what’s happening with the country’s first-time homebuyers and younger generations in general. Mortgage originations were down 19 per cent among millennials (ages 24-38) and 22 per cent among gen-Z (18-23).
Overall, the number of new mortgages issued between January and March was down 3.4 per cent compared to the same period last year. This follows at eight per cent drop in the last three months of 2017 compared to the last three months of 2016. (New mortgages include brand new loans, loans renewed at a different lender and refinancing.)
Older generations could be re-mortgaging or borrowing against their home equity in order to “support retirement or to financially support younger generation family members,” the TransUnion report reads.
Research shows that retirement expenses tend to skyrocket around age 80, due to health care and long-term care costs.
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But the pre-war generation is also joining forces with boomers to help the younger kin.
“We hear of parents and grandparents supporting their children and grandchildren, whether it’s student loans or buying a house,” Matt Fabian, director of financial services research and consulting for TransUnion Canada, told Global News.
That said, as large as the six-fold surge in new mortgages issued to Canada’s 70-to-90-year-olds may seem, the volume of mortgages in that age group remains very small, Fabian said. (The data does not include reverse mortgages, TransUnion said.)
Still, the numbers do suggest that the stricter mortgage rules introduced on Jan. 1 of this year are having a much bigger impact on newer generations.
“The stress-testing rules are about affordability,” Fabian said. Younger mortgage applicants may be either finding out that they don’t qualify or that they can’t get the amount and loan type they want, he added.
Older Canadians who have enjoyed remarkable home-equity gains in the last few years don’t have to worry about stricter standards on things like loan-to-value ratios, Fabian said.
The data also shows significant variations across cities. While new mortgages dropped by almost 18 per cent in Toronto, they remained virtually flat in Vancouver, with growth of less than one per cent in the first three months of 2018 compared to the previous year.
But new mortgage volumes rose in Ottawa (up 8.4 per cent) and Montreal (up 5.2 per cent), where relatively low real estate prices have been attracting an influx of buyers.
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More credit cards and higher balances
Canadians may be having a harder time getting a mortgage, but they aren’t giving up their credit cards.
TransUnion reported a “surge” in the number of credit cards issued in the first three months of 2018, which was up 5.6 per cent year-over-year across all age groups.
The average consumer now carries a balance of $4,200, the data shows. Collectively, Canadians now owe $99 billion through their credit cards.
Total non-mortgage debt still rising, although at a slower rate
Overall, the average Canadian had almost $29,650 in debt excluding mortgages in the period between April and June, an increase of almost four per cent compared to the same three months in 2017, TransUnion said.
“This is the third consecutive quarter where the quarterly change is less than the change seen in the previous year,” the report noted.
In other words, Canadians continue to borrow more, but at least the pace at which they’re piling on debt has slowed.