Canadians Are Still Using Their Homes As ATMs, Just Not With HELOCs

Canadians are cooling on the home equity line of credit (HELOC) loans, but homes are still being used as ATMs Machines. Filings show the balance of HELOC loans fell slightly in November. Don’t let that fool you into thinking the spree of home equity spending is over though. Households are still borrowing hundreds of millions per month secured by home equity. They’re just using HELOC-like products, instead of HELOCs.

Canadians Owe Over $171 Billion In HELOC Debt

HELOC debt hit $171.6 billion in November, making a negligible decline of $24 million. Steady growth was still present, with the balance 2.9% (+$4.9 billion) higher than last year. We’ll circle back to why this number is relatively small, but first let’s look at how this compares to recent data. 

HELOC Debt Is Slowing In Growth, As Households Use Other Equity Loan Products

HELOC balances are steady but slow. The 2.9% annual growth rate in November marked a deceleration from the peak reached in August. It might not sound like much, but prior to 2022, balances hadn’t grown this fast since 2013. It’s bigger than usual, but not quite what you’d envision with the talk about home equity leverage.

Do you Call That A HELOC? This Is A HELOC

The difference has to do with the definition of a HELOC. Prior to a few years ago, data on HELOCs wasn’t broken out. This resulted in analysts using the balance of all personal loans secured by home equity. HELOCs now use a strict definition, that happens to exclude HELOC-type loans.

Home equity loans with fixed repayment schedules, or bundled with mortgages aren’t included. A household might think of these as HELOCs, and they might even be sold as them. However, for the purposes of regulation, they’re not the same. That might lead to thinking use is low, but in reality, there’s still robust use of home equity loans. People are just picking newer products that might be more attractive to borrowers. 

Canadian Debt Secured By Home Equity

Canadian household debt secured by residential real estate equity.


Source: Bank of Canada

Canadians Owe Over $309 Billion In Home Equity Loans

Personal loans secured by housing saw a slight increase of 0.1% (+$300 million) to reach $309.2 billion in November. Monthly growth was smallish compared to recent growth. However, the annual rate still came in at a robust 8.6% (+$24.6 billion). For context, these loans are outpacing annual growth for income, savings, or even GDP.

Canadian Debt Secured By Home Equity Growth

The annual growth of household debt is secured by residential real estate equity. 


Source: Bank of Canada


HELOC use is technically low, but that doesn’t mean households aren’t indulging in home equity use. Despite higher interest rates, the balance of home equity loans is still surging by hundreds of millions per month. The rise highlights the ongoing trend of using housing as a source of personal funding. 

Canada’s bank regulator recently warned about the rising popularity of home equity loans. They believe the persistent use from some households might be hiding distress. Perpetually carrying debt can make borrowers vulnerable to shock, amplifying small issues.

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