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As interest rate hikes start to bite, household debt growth slowed in July, Statistics Canada reports.

Total household borrowing increased by 0.4% in July to $2.8 trillion, a slower increase than the previous month when total liabilities rose by 0.6%.

The slowdown came as the Bank of Canada raised interest rates by 100 basis points to 2.5% in July, after 50 bps hikes in April and June. The overnight rate is now 3.25% after another hike earlier this month.

In July, mortgage debt was up 0.5% to $2.05 trillion, which is the smallest increase since February 2021 and represented five straight months of slowing growth, the agency said.

The rise in borrowing costs has been accompanied by a drop in home sales and prices.

StatsCan noted that the volume of existing home sales was down by 21.0% in July, the fourth consecutive monthly decrease. The average sale price dropped for the fifth straight month.

With the recent slowdown in mortgage debt growth, on an annual basis, household mortgage debt was up 9.3% in July.

StatsCan also reported that non-mortgage debt grew slightly in July, rising just $0.2 billion to $718.1 billion. In June, non-mortgage debt was up $3.7 billion.

Credit card debt grew by 0.2% in July, and home equity lines of credit (HELOCs) rose by 0.3% in the month.

“On a seasonally adjusted basis, credit card balances rose 0.5% after posting stronger growth for several months since the beginning of 2022, while advance estimates of retail sales indicate a 2.0% decrease in July, following six consecutive monthly increases,” StatsCan said.