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The rate at which Canadians have been racking up new mortgage debt has slowed in recent months, lending credence to the theory that the country's housing market will hold up, Canada Mortgage and Housing Corp. suggests.
The crown corporation released its third-quarter financial results Tuesday, offering a new glimpse into the country's mortgage market.
"The level of household debt remains a concern but there are encouraging signals," it said.
The growth of mortgage debt has significantly decelerated since March, particularly in recent months, it said.
The growth of personal loans, lines of credit and credit cards has also levelled off recently. But the largest debts that Canadians hold are their mortgages, and so the trend in that area is helping to reduce the growth rate of total household credit.
At the same time, CMHC says is analysis suggests house prices are in line with demographic changes and economic growth.
"CMHC, in consultation with the Bank of Canada and the Department of Finance, is continuing to refine models and techniques used to help identify risks of house price bubbles," it stated. "At the moment, there is little evidence of a significant over-valuation in the Canadian housing market overall, although some centres warrant close monitoring."
CMHC expects housing markets to stabilize next year, and house prices to grow modestly going forward.
Finance Minister Jim Flaherty took action earlier this year to reduce the growth of mortgage debt, including tightening up the rules surrounding mortgage refinancing, and decreasing the maximum length of insured mortgages from 35 years to 30. (Canadian mortgages must be insured if borrowers have a downpayment of less than 20 percent).
CMHC says that the refinance activity it's seeing, which initially fell by nearly 40 percent, is still down 25 percent compared to the level it was at before the new rules came into effect. The overall level of mortgage insurance that's being sought from the crown corporation dipped by about 10 percent initially, but has since recovered.