Canada saw a "significant drop" in the number of new mortgages issued during the final quarter of 2021, a new report from Equifax reveals.

During the fourth quarter of the year, new mortgage growth declined 8.1% compared to the same quarter in 2020, with some of the country's hottest housing markets, like Southern Ontario's Toronto and Hamilton markets, seeing the biggest drops in the number of mortgages. New mortgages in Toronto fell 16.1% while Hamilton's plummeted 18.7%.

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Interestingly, although the average loan amount for mortgages obtained during Q4 jumped up 10.1% year-over-year, it actually fell 1.5% compared to Q3 of 2021, now sitting at $355,000. This marks the first quarter-over-quarter drop in mortgage loan amounts since the pandemic began. Although home prices across the country continue to grow, Equifax notes that this may be a sign that they are beginning to stabilize.

“There’s no question that sky-rocketing house prices have decreased housing affordability across all segments,” AVP of Advanced Analytics at Equifax Canada Rebecca Oakes said. “In addition to high house prices, lenders have also started to move interest rates up in anticipation of rate rises from the Bank of Canada. This could also be limiting the purchasing capacity of many consumers.”

Overall consumer debt grew to $2.2 trillion in Q4 -- a 7.9% year-over-year increase. But perhaps somewhat surprisingly, the average individual consumer debt (excluding mortgages) is actually down slightly, falling 0.6% annually to $20,686.

“The drop in auto and installment loan debt has been the biggest driver in bringing down average debt this quarter,” Oakes said. “Overall average debt is low, but a small increase in average debt is visible across certain segments.”

Credit Card Spending is Higher Than Ever

But the lower average debt doesn't necessarily mean individuals were spending any less money. In fact, credit card spending was higher than ever during Q4, surging up 9.8% from the previous quarter and 14.4% annually. The average monthly credit spend per card hit $2,205 -- up 6.8% from the previous quarter. This higher spending resulted in a higher overall credit card balance, jumping 2.4% year-over-year.

"The holiday period always leads to an increase in spending, but Q4 2021 saw higher than ever average credit card spending per credit card consumer,” Oakes said. “Consumer payment behaviour is slowly getting back to pre-pandemic levels as disposable income from government benefits depletes, but consumers are making less payment for every dollar spent compared to the same time period last year."

Overall, debt delinquencies are continuing on a downward trajectory across Canada, with delinquencies on mortgages falling 0.11% and non-mortgage delinquencies dropping 0.86% compared to last quarter. But when looking at specific types of debt, some delinquency rates are rising. Credit card delinquency jumped 2.7% compared to Q3, while non-bank auto delinquencies shot up 14.7%.

“High inflation is impacting how far a dollar stretches day-to-day for consumers,” Oakes said. “Delinquencies are likely on the upswing for the immediate future when you layer in the pull back of government support and COVID-19 restrictions still hurting businesses.”