Canadians' HELOC borrowing made a big comeback in February

OSFI figures show credit balances increased $2 billion in just 28 days, largest single-month increase since 2012

Canadians' HELOC borrowing made a big comeback in February

Interest rates in Canada are rising, which has apparently prompted many Canadian households to borrow as much as possible while they can.

According to an analysis of filings with the Office of the Superintendent of Financial Institutions (OSFI) published by Better Dwelling, home equity line of credit (HELOC) balances soared in February. Canadians borrowed $2 billion in HELOC debt during the last 28 days, the largest in a month since 2012.

HELOC borrowing has been on the decline in Canada, but it appears to be making a comeback as the national balance reached $168.5 billion in February, a 1.2% (2.0 billion) increase from the previous month. That brought HELOC debt up to $2.3 billion, 1.4% higher compared to the same period last year.

That rate of growth in HELOC balances was the fastest seen since May 2013, Better Dwelling said.

February’s HELOC balances were also the highest since December 2020, reversing a 13-month downward trend in just one month.

The most striking aspect of the February HELOC numbers is the phenomenal rise seen in just 28 days. The month-over-month gain of $2 billion is the most since 2012. It has only happened 10 months in the last 386 months, with the exception of 2009.

2009 seemed to be a year when people withdrew a large sum of cash against the equity of their residence. In addition, the monthly rise accounted for 87% of the net growth in HELOC debt during the previous 12 months.

There is no definitive reason why Canadians incurred $2 billion in HELOC debt for only 28 days in February. Because the RRSP deadline was in February this year, many people may have used their home equity to make up the shortfall.

It was also a month before the rate hikes, so some of that money may have gone toward down payments to get financing and lock in purchases before the hikes.