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Canadians took out fewer new mortgages in 2017 as home sales slumped, but delinquency rates improved as those who did buy were better able to afford their monthly payments even as costs rose.

Home buyers originated 959,000 new mortgages with a total balance of $264.2-billion in 2017, down 6.5 per cent from 1,025,400 new mortgages with a total balance of $268.7-billion in 2016, according to new data from Canada Mortgage and Housing Corp.

The number of newly originated mortgages was especially weak in the fourth quarter of 2017, dropping by 7.7 per cent compared with the same period the year before, while the total dollar value of all new mortgages fell 4.9 per cent, CMHC said. Origination trends are based on data from new mortgage accounts, which include mortgages for newly purchased homes as well as mortgages renewed at a different financial institution.

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Brent Weimer, a senior specialist in socioeconomic analysis at CMHC, said the volume of new mortgage loans fell last year as home sales also slumped, driving down demand for new borrowing. The number of homes sold in Canada fell 4 per cent in 2017, led by an 18-per-cent drop in sales in the Greater Toronto Area and 10.5-per-cent decline in Vancouver, according to Canadian Real Estate Association data.

While the volume of new mortgages fell in 2017, the average size of a new mortgage rose as housing prices climbed 4.1 per cent nationally. Mr. Weimer said house price inflation was seen even in markets – such as Toronto – where the total volume of sales was down.

“There are a number of markets where the average price of a new home went up considerably in 2017 – we mentioned Vancouver and Toronto as being examples of markets that saw some pretty strong price increases," he said.

CMHC said the average outstanding mortgage had a balance of $203,350 in the fourth quarter last year, up 4 per cent from $195,770 at the end of 2016. The average balance on a new mortgage originated in the fourth quarter last year was $280,070, up 3 per cent from $271,890 from the fourth quarter of 2016.

Higher mortgage sizes meant scheduled monthly mortgage payments climbed 3.3 per cent in Canada to an average of $1,235 in the fourth quarter of 2017. Home buyers with a new mortgage in the fourth quarter of 2017 paid average mortgage costs of $1,418 per month, an increase of almost 7 per cent compared with a year earlier.

Despite growing mortgage sizes, Canadians appear well able to afford their borrowing. Just 0.29 per cent of mortgages were delinquent in the fourth quarter of 2017, an improvement from 0.34 per cent at the same time in 2016, according to data prepared for CMHC by credit rating agency Equifax Canada. Mortgages are considered delinquent when payments are more than 90 days past due.

Mr. Weimer said mortgage delinquencies are closely linked to employment trends, and 2017 saw some of the lowest national unemployment rates in Canada since the 1970s.

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“A strong economy means fewer delinquencies. … As long as the economy is strong and people have jobs, you would expect the delinquency rate to remain very low.”

Other types of household debt climbed last year, the CMHC data show. Outstanding borrowing from home equity lines of credit, for example, rose 2.7 per cent in the fourth quarter of 2017, while auto loan balances were up 6.6 per cent and outstanding credit card debt rose 3.1 per cent.

CMHC said the proportion of consumers with a loan for a new vehicle reached its highest level since 2006, while average credit card balances reached their highest point in five years, while delinquency rates declined for both products.

Mr. Weimer said it is typical to see borrowing rise when employment improves because people who feel wealthier are more likely to be confident to make purchases.

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