Canadian HELOC Borrowing Is Back, Rising Nearly As Fast As Mortgages

Canadian homeowners are turning back to borrowing against home equity as Home Equity Line of Credit (HELOC) usage increases at nearly the same rate as mortgage debt. Statistics Canada data shows HELOC debt reached $170 billion in September, growing by 3% over the previous year. Meanwhile, the broader category of household debt secured by housing, which includes HELOC-like loans, climbed 3.2% to $325 billion during the same period.

The resurgence in HELOC borrowing follows a period of decline driven by rising interest rates and tighter regulations, which had initially cooled the housing market. Recently, however, improved borrowing conditions have reignited consumer interest. This trend reflects a shift in sentiment among Canadians, who increasingly leverage their home equity for spending or investment purposes.

Toronto and Vancouver remain hotspots for HELOC borrowing, with over 30% of the total debt concentrated in these cities. Many borrowers appear to be using HELOCs to fund real estate investments or manage household expenses, a trend that mirrors growing concerns about housing affordability and debt sustainability. Rising consumer reliance on these loans has sparked discussions about the risks of over-leveraging.

Some experts worry about the long-term economic implications of relying heavily on HELOCs. The borrowing surge reflects a dependency on gains from home values rather than productivity-driven growth. This poses risks as homeowners could face financial strain if housing prices or economic conditions shift unfavorably.

Regulators may need to scrutinize the HELOC market more closely as its growth rate rivals that of mortgages. Increased oversight could address potential vulnerabilities in Canada’s financial system and protect consumers from excessive borrowing risks.

As the HELOC market regains momentum, the balance between enabling consumer flexibility and ensuring financial stability will remain a key challenge for policymakers. Homeowners and lenders alike must weigh the benefits of these loans against the risks in a dynamic economic landscape.