Take an in-depth look at the indicators related to the financial vulnerabilities of the elevated level of household indebtedness and high house prices.
Indicators related to the elevated level of household indebtedness
Characteristics of mortgage originations
Data include purchases and refinancing originated by federally regulated financial institutions.
Mortgages with a loan-to-value ratio greater than 80% must be insured. Mortgages with a loan-to-value ratio of 80% or less are typically uninsured, but a small portion of these mortgages are insured. However, these do not have a material impact on the plotted series. Uninsured mortgages may be portfolio-insured by the lender after the loan is originated if the loan meets insurance standards. The split used here (insured versus uninsured) refers to whether the loan is transactionally insured at origination.
The number of mortgages originated is calculated as the total number of mortgages originated each quarter (not annualized).
The number of mortgages originated during a given quarter includes all mortgages issued by federally regulated financial institutions (which comprise banks, trusts and loan companies, but exclude credit unions, private lenders and mortgage financing corporations).
Mortgage interest rates reported from March 2017 onward are calculated as the median of the best broker-offered rates from each lender, as compiled by Lender Spotlight. Before March 2017, the mortgage rate series were constructed by averaging the best high-ratio mortgage rates offered by six individual brokers (Mortgage Alliance, Invis, Super Brokers [CanEquity], Dominion Lending Centres, Select Mortgage Corporation and MonsterMortgage.ca), collected by the Bank of Canada from their websites.
Bank of Canada staff seasonally adjust the number of mortgages originated using an X-13 procedure. Other data series are not seasonally adjusted.
Data sources:
- For all data except mortgage interest rates—regulatory filings of Canadian banks and Bank of Canada calculations
- For mortgage interest rates—Lender Spotlight, brokers’ websites and Bank of Canada calculations
Loan-to-income ratio
The loan-to-income ratio uses data from the time of mortgage application. Income is the reported gross income used for mortgage qualification.
Data sorted by type of homebuyer include home purchases originated by federally regulated financial institutions (FRFIs). All other data include both purchases and refinancing originated by FRFIs.
Mortgages with a loan-to-value ratio greater than 80% must be insured. Mortgages with a loan-to-value ratio of 80% or less are typically uninsured, but a small portion of these mortgages are insured. However, these do not have a material impact on the plotted series. Uninsured mortgages may be portfolio-insured by the lender after the loan is originated if the loan meets insurance standards. The split used here (insured versus uninsured) refers to whether the loan is transactionally insured at origination.
The types of homebuyers are first-time homebuyers, repeat homebuyers and investors (as defined in Khan and Xu 2022). The share of new mortgages by homebuyer type includes only mortgages originated for purchase (i.e., they exclude mortgage refinancing) and are calculated for eight lenders whose data are available in both TransUnion and regulatory datasets. All series reported by type of homebuyer have a publication lag of one quarter relative to other series, due to the process used to identify the types of homebuyers.
To protect the privacy of Canadians, TransUnion did not provide any personal information to the Bank. The TransUnion dataset was anonymized, meaning it does not include information that identifies individual Canadians, such as names, social insurance numbers or addresses.
Data series are not seasonally adjusted.
Data sources: Regulatory filings of Canadian banks, TransUnion and Bank of Canada calculations
Loan-to-value ratio
The loan-to-value (LTV) ratio is measured at the time of mortgage application.
Data sorted by type of homebuyer include home purchases originated by federally regulated financial institutions (FRFIs). All other data include both purchases and refinancing originated by FRFIs.
The Bank reports the average rather than the median LTV ratio because of the important clustering of values around 65%, 80% and 95%.
The types of homebuyers are first-time homebuyers, repeat homebuyers and investors (as defined in Khan and Xu 2022). The share of new mortgages by homebuyer type includes only mortgages originated for purchase (i.e., they exclude mortgage refinancing) and are calculated for eight lenders whose data are available in both TransUnion and regulatory datasets. All series reported by type of homebuyer have a publication lag of one quarter relative to other series, due to the process used to identify the types of homebuyers.
To protect the privacy of Canadians, TransUnion did not provide any personal information to the Bank. The TransUnion dataset was anonymized, meaning it does not include information that identifies individual Canadians, such as names, social insurance numbers or addresses.
Data series are not seasonally adjusted.
Data sources: Regulatory filings of Canadian banks, TransUnion and Bank of Canada calculations
Mortgage debt service ratio
The mortgage debt service ratio (DSR) is measured at the time of mortgage application. The mortgage DSR is calculated as the monthly mortgage payment (assuming semi-annual compounding and monthly payments) divided by the reported income used for mortgage qualification.
Data sorted by type of homebuyer include home purchases originated by federally regulated financial institutions (FRFIs). All other data include both purchases and refinancing originated by FRFIs.
Mortgages with a loan-to-value ratio greater than 80% must be insured. Mortgages with a loan-to-value ratio of 80% or less are typically uninsured, but a small portion of these mortgages are insured. However, these do not have a material impact on the plotted series. Uninsured mortgages may be portfolio-insured by the lender after the loan is originated if the loan meets insurance standards. The split used here (insured versus uninsured) refers to whether the loan is transactionally insured at origination.
The types of homebuyers are first-time homebuyers, repeat homebuyers and investors (as defined in Khan and Xu 2022). The share of new mortgages by homebuyer type includes only mortgages originated for purchase (i.e., they exclude mortgage refinancing) and are calculated for eight lenders whose data are available in both TransUnion and regulatory datasets. All series reported by type of homebuyer have a publication lag of one quarter relative to other series, due to the process used to identify the types of homebuyers.
To protect the privacy of Canadians, TransUnion did not provide any personal information to the Bank. The TransUnion dataset was anonymized, meaning it does not include information that identifies individual Canadians, such as names, social insurance numbers or addresses.
Data series are not seasonally adjusted.
Data sources: Regulatory filings of Canadian banks, TransUnion and Bank of Canada calculations
Household credit performance
To protect the privacy of Canadians, TransUnion did not provide any personal information to the Bank. The TransUnion dataset was anonymized, meaning it does not include information that identifies individual Canadians, such as names, social insurance numbers or addresses.
Data sources: TransUnion and Bank of Canada calculations
Indicators related to high house prices
Resale market activity and prices
All data series are seasonally adjusted by the Canadian Real Estate Association (CREA). Values are not available for download, reflecting the licencing agreement between the Bank of Canada and CREA.
Data source: Canadian Real Estate Association and Bank of Canada calculations
Types of mortgaged homebuyers
The types of homebuyers are first-time homebuyers, repeat homebuyers and investors (as defined in Khan and Xu 2022). The share of new mortgages by homebuyer type includes only mortgages originated for purchase (i.e., they exclude mortgage refinancing) and are calculated for eight lenders whose data are available in both TransUnion and regulatory datasets. All series reported by type of homebuyer have a publication lag of one quarter relative to other series, due to the process used to identify the types of homebuyers.
These numbers generally include cottages and other recreational properties as well as homes purchased by house flippers. These numbers exclude purchases made by foreign buyers (unless the foreign buyer acquired the property using a mortgage at a Canadian federally regulated financial institution), cash purchases, and transactions financed by a mortgage originated by a provincially regulated, unregulated or private lender.
Data series are not seasonally adjusted but are expressed as a 12-month moving average, which typically removes any seasonal patterns.
To protect the privacy of Canadians, TransUnion did not provide any personal information to the Bank. The TransUnion dataset was anonymized, meaning it does not include information that identifies individual Canadians, such as names, social insurance numbers or addresses.
Data sources: Regulatory filings of Canadian banks, TransUnion and Bank of Canada calculations
House-flipping activity
Data series are not seasonally adjusted but are expressed as a 12-month moving average, which typically removes any seasonal patterns.
Data sources: Teranet, National Bank and Bank of Canada calculations
House price expectations
These indicators are derived from the Canadian Survey of Consumer Expectations, which is conducted on a quarterly basis by the Bank of Canada.
Data series are not seasonally adjusted.
Data sources: Bank of Canada and Bank of Canada calculations
References
Khan, M. and Y. Xu. 2022. “Housing demand in Canada: A novel approach to classifying mortgaged homebuyers.” Bank of Canada Staff Analytical Note No. 2022-1.