{"id":13269,"date":"2019-08-06T15:15:58","date_gmt":"2019-08-06T22:15:58","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=13269"},"modified":"2019-07-27T10:55:52","modified_gmt":"2019-07-27T17:55:52","slug":"canadians-may-be-cooling-to-use-their-homes-as-atms","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2019\/08\/canadians-may-be-cooling-to-use-their-homes-as-atms\/","title":{"rendered":"Canadians May Be Cooling to Use Their Homes as ATMs"},"content":{"rendered":"<p style=\"text-align: justify;\">They\u2019re a popular tool most often used to fund home renovations, especially in recent years, but Canadians may be cooling to borrowing via home equity lines of credit (HELOC).<\/p>\n<p style=\"text-align: justify;\">\u201cHELOC loans fell month-on-month for the first time since May 2016 as they remain on a slowing trajectory following strong increases through 2017 and 2018,\u201d write Scotiabank\u2019s Alena Bystrova, a research analyst, and Juan Manuel Herrera, an economist, in a recent report.<\/p>\n<p style=\"text-align: justify;\">In a follow-up email, Herrera tells Livabl, \u201cThe most recent slowdown would suggest that fewer Canadians are opening HELOCs and\/or those who have a line of credit on their home have chosen to hold back on borrowing against their property.\u201d<\/p>\n<p style=\"text-align: justify;\">He adds the bank does not have data on the total number of HELOCs accounts open nationally.<\/p>\n<p style=\"text-align: justify;\">Herrera suggests the Canadian housing market slowdown that came after years of strong price growth might have dampened HELOC demand.<\/p>\n<p style=\"text-align: justify;\">\u201cHELOC loans may have declined as homeowners who consider spending on renovations in their homes have a reduced incentive to do so now that home prices have seen practically no increase nationwide since late-2018\u2026 Any additional money spent on a home would not provide the financial returns that it could have resulted in two years ago,\u201d he says.<\/p>\n<p style=\"text-align: justify;\">\u201cThe Bank of Canada\u2019s rate-hiking cycle through 2017-18 also led to an increase in consumer interest rates, which acts as a deterrent for people taking out additional loans,\u201d Herrera continues.<\/p>\n<p style=\"text-align: justify;\">Rapidly rising home prices could have encouraged more Canadians to take on HELOCs as they tried to get top dollar for their homes.<\/p>\n<p style=\"text-align: justify;\">In part a result of the decline, household credit growth slowed to a month-over-month rate of 4.4 percent, shy of April\u2019s 4.9-percent gain despite mortgage growth tracking at an impressive 6.3 percent.<\/p>\n<p style=\"text-align: justify;\">That\u2019s the biggest monthly increase since November 2018, when homebuyers were rushing to purchase properties before stress testing for uninsured mortgages took effect the following January.<\/p>\n<p style=\"text-align: justify;\">Scotiabank researchers note that HELOCs are still a small piece of the consumer-credit pie, which also includes mortgages and other loans.<\/p>\n<p style=\"text-align: justify;\">\u201cDespite the rapid acceleration of HELOC borrowing since early-2016, these loans have gathered \u2018only\u2019 an additional 2.4 ppts (percentage points) share of total consumer credit with chartered banks over the last three years,\u201d write Bystrova and Herrera.<\/p>\n<p style=\"text-align: justify;\">Just 14 percent of Canadian households have a HELOC.<\/p>\n<p style=\"text-align: justify;\">Roughly half of all HELOCs in 2018 went towards financing renovations, and the next most common use is debt consolidation, which accounts for a 22-percent share. Day-to-day expenses and vehicle purchases represent a 19-percent share of HELOCs.<\/p>\n<p style=\"text-align: justify;\">Earlier this year as key Canadian housing markets corrected, a prominent credit-rating agency noted the risk these loans can present during downturns.<\/p>\n<p style=\"text-align: justify;\">\u201cIn the event of a correction, borrowers could find themselves with a debt load that exceeds the value of their home, which is often referred to as negative equity,\u201d writes Robert Colangelo, senior vice president, global financial institutions group, at DBRS.<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.livabl.com\/2019\/07\/canadians-have-been-using-their-homes-like-atms-for-years-beginning-change.html\" target=\"_blank\" rel=\"noopener noreferrer\">Canadians Have Been Using Their Homes Like ATMs for Years. Is That Beginning to Change?<\/a> by Josh Sherman | Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>They\u2019re a popular tool most often used to fund home renovations, especially in recent years, but Canadians may be cooling to borrowing via home equity lines of credit (HELOC). \u201cHELOC &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2019\/08\/canadians-may-be-cooling-to-use-their-homes-as-atms\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-13269","post","type-post","status-publish","format-standard","hentry","category-real-estate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Canadians May Be Cooling to Use Their Homes as ATMs &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2019\/08\/canadians-may-be-cooling-to-use-their-homes-as-atms\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Canadians May Be Cooling to Use Their Homes as ATMs &#8226; 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