Canadian HELOC debt rising rapidly

Canadian HELOC debt rising rapidly

New data shows balance increased by $1.7 billion from August to September

Canadian homeowners are resorting to their reserves to fund surging expenses and an increased cost of living. New Bank of Canada data indicates home equity lines of credit debt grew in September. This figure moderated last year but is now growing at a feverish pace, and quicker than the economy. Analysts say it contributes in boosting the economy but it also renders it more susceptible to surprise setbacks.

Canadian HELOC debt saw billions added to its balance over the past year. The outstanding balance reached $270.2 billion in September, a 0.65% increase from August, which equaled $1.7 billion. The balance is nearly 5 per cent, and a whopping $11.4 billion larger than the same month of last year.

Although the annual growth rate dropped slightly from the previous month, it was still the second highest month recorded since May of 2019. As the outstanding debt amount increases, the speed of growth is expected to decelerate. Households have borrowed $11.4 billion over the last twelve months, which is more than entire annual GDP of Prince Edward Island.

HELOC debt is growing quickly and now makes up for 14 per cent of the country's GDP. That figure was just under 12 per cent five years ago - gaining two percentage points on an entire economy is no small task.