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Determinants of Mortgage indebtedness in Canada

  • Mario Fortin

    ()

    (GREDI, Département d'économique, Université de Sherbrooke)

  • Andre Leclerc

    ()

    (Secteur sciences humaines, Université de Moncton, campus d’Edmundston)

Mortgage indebtedness has risen considerably in Canada in recent years, pushing households’ debt-to-income ratio to an all time high. In order to identify what variables explains these changes in the stock of debt, we analyze the inflow and outflow of mortgage financing. We show that the number of new mortgage loans is mostly influenced by nominal interest rates while their average value reacts only to housing price. As to the outflow of debt repayment it is sensitive to more variables. Since housing price is also strongly influenced by nominal interest rate, we show that the main driving force towards higher Canadian households’ mortgage debt is the reduction in nominal interest rate.

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File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0711.pdf
File Function: First version, 2007
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Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 07-11.

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Length: 29 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:shr:wpaper:07-11
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