We're a little less house-poor than last year
It turns out that one of Canada's big real-estate worries has begun to correct itself: Canadians are taking on less mortgage debt these days.
And that's put the brakes on a trend that had top government officials worried about the state of consumers' household finances.
The growth of mortgage loans has slowed to an average of just under $160,000, according to the latest report of the Canadian Mortgage and Housing Corp.
That reflects both tougher lending rules imposed by Ottawa and a slowing economy, which has put downward pressure on house prices.
Mortgage insurance bought by homeowners facing high-ratio debts fell by about 10 per cent.
What's likely behind the trend? A weaker economy has left consumers cautious and less likely to take on higher personal loans, lines of credit, car loans and credit card debt.
A slowdown in mortgage debt also suggests Canadians are putting more money down on their homes and avoiding high-risk mortgages.
CMHC notes that there was a drastic slowdown in mortgage debt growth after federal Finance Minister Jim Flaherty tightened mortgage eligibility rules this -- the third time the government has done so in three years.
In March, the government reduced the maximum amortization period for new government-backed insurance mortgages from 35 years to 30.
Canadian mortgages must be insured if a homeowner pays less than 20 per cent of a house's value in a downpayment.
As well, Ottawa cut the amount Canadians can borrow in refinancing mortgages from 90 per cent to 85 per cent of the value of a home.
Flaherty and Bank of Canada governor Mark Carney have been warning for months that Canadians have been racking up more debt than they can sustain as a result of a long period of ultra-low interest rates.
Earlier this fall, Statistics Canada reported that Canadian household debt had reached a record 149 per cent of disposable income in the second quarter.
In October, the International Monetary Fund warned that Flaherty may need to act a fourth time to keep mortgage debt under control.
It said that a combination of households strapped by debt and falling home prices have the potential to damage the domestic Canadian economy by curtailing spending.
However, officials with the CMHC said the average outstanding loan on their books was $159,740 at the end of the third quarter, slightly above the previous year.
But the average equity of homeowners in their homes was 45 per cent, compared to 44 per cent for the same period last year.
The CMHC says only 0.42 per cent of CMHC mortgages were in arrears during the period, a rate in line with the industry trend.
The government's housing agency believes mortgage rates will remain relatively flat until late 2012.
--with files from The Canadian Press