The number of Canadians borrowing against their homes is growing at the fastest rate in over 5 years. According to a report by the Office of the Superintendent of Financial Institutions (OSFI), home equity lines of credit (HELOC) balances increased by 7.2% year-on-year in December to $230 billion, the fastest growth since 2012.
Over the same period other types of consumer debt, including personal loans, credit card balances, car loans and overdrafts increased by 3.2%. HELOCs allow customers to borrow up to 65% of the value of their homes, with the funds commonly used for renovations, investing and consolidating debt.
"RFi Group data reflects the recent growth of HELOC loans, with 15% of Canadian retail banking customers holding a secured line of credit against their home or investments, an increase of 3% over the past 12 months."
However, the Bank of Canada has previously warned about the impact of HELOCs, as this type of loan could leave borrowers vulnerable to rising interest rates and corrections in the housing market.