TORONTO (Reuters) - Canadian mortgage debt rose in May at the fastest annual rate in three years, boosted by a jump in property sales and record levels of mortgage payment deferrals due to the coronavirus pandemic, data from the national housing agency showed.
Mortgage debt rose 6% year-over-year in May, the fastest pace since July 2017, the Canadian Mortgage and Housing Corporation (CMHC) said in an annual report on the residential home loan industry.
CMHC has been warning about excessive household borrowing as it forecast a drop of as much as 18% in home prices despite a recent recovery in the market. In July, it tightened underwriting standards for riskier borrowers.
The rise in mortgage debt origination was helped by higher pre-pandemic home sales, for which closing dates were set into the spring months and mortgages extended in the second quarter, CMHC said.
Also contributing to the rise in origination was a record number of homeowners deferring their mortgage payments.
The top six banks reported Canadian mortgage deferrals of 13.5% in the three months through July, from a peak of 16% at the end of the previous quarter.
Mortgage debt growth also accelerated in April, after climbing 5.1% year-over-year in the first three months of 2020, the report showed.
Supportive of Canada's housing market, the Bank of Canada has since March slashed interest rates to nearly zero and begun for the first time a large-scale bond-buying program.
In addition, Canada's financial regulator in March said it would treat deferrals as performing loans, enabling banks to avoid an increase in credit risk as a result. It said it would reverse that change starting Oct. 1.
Canadian housing starts rose 6.9% in August to notch a 13-year high, data on Wednesday from CMHC showed, while data last month from the Canadian Real Estate Association showed home sales surged 26% in July, posting a record high.