What’s the history of mortgages in Canada, and how did the Great Depression shape it?
As a level 2 mortgage broker in St. Catharines, Fusion Mortgage Group is deeply interested in how housing finance evolved during tough times, especially during the Great Depression in Canada. This era didn’t just bring economic collapse; it reshaped how Canadians access mortgages and how the government supports housing today.
In the early 1930s, Canada and the Great Depression became inseparable. The country was hit hard. By 1933, more than one-quarter of Canadians were unemployed. Thousands lost their jobs, homes, and savings. Many families couldn’t afford rent or basic necessities, and some moved from city to city in search of relief or work.
However, the Great Depression in Canada was more than just an economic disaster. It pushed the government to take new steps to protect its citizens and the economy. One of the biggest changes came in housing and finance. Before the Depression, getting a mortgage was expensive and risky. Banks offered short-term loans with high interest and very little support if borrowers fell behind.
The crisis made it clear that the old system wasn’t working. As the economy collapsed, so did trust in financial institutions. This led to new ideas, new programs, and the creation of a national approach to housing loans.
What is the Great Depression in Canada
The Great Depression of the early 1930s was a global event, but Canada felt it more than many other countries. The crisis began with the stock market crash of 1929, but the problems ran much deeper.
Canada’s economy at the time depended heavily on exports like wheat, timber, and minerals. When world prices for these goods dropped, Canadian workers and farmers were among the first to feel the impact. Between 1929 and 1933, more than 30% of workers lost their jobs. The Prairies were also hit by years of drought, making it nearly impossible to grow crops. This period became known as the “Dirty Thirties.”
People lost not just their jobs but also their homes and savings. Many relied on government relief, which was limited and not always easy to get. Towns and cities struggled to provide support. The suffering was widespread, and the situation stayed difficult for nearly a decade.
This painful time changed Canada. It led to the creation of new social programs, government action in the economy, and the first serious look at how to make housing more stable for families across the country.
Causes of the Great Depression
Some point to the 1929 stock market crash, but most agree that the real issue was a mix of falling prices, lower demand, and a collapse in credit.
In Canada, the numbers were staggering. From 1929 to 1933, total public and private spending dropped by 42%. The country’s Gross National Expenditure, which measures all economic activity, fell sharply. Factories closed, farms failed, and workers were laid off in large numbers.
By 1933, about 30% of Canada’s workforce was unemployed, and one in five Canadians depended on relief payments to survive. These weren’t just numbers. They were real people facing real hardship. The situation didn’t improve quickly, either. Unemployment stayed above 12% all the way until the Second World War began in 1939.
A key reason the Great Depression lasted so long was that there were no strong national programs to deal with such a crisis. There were no automatic systems in place to support people who lost their jobs or homes. That would change in the years ahead, as the country learned hard lessons from this experience.
How Did it Impact the Population?
In the 1930s, Canada’s population growth reached its lowest point since the 1880s. In 1929, around 169,000 immigrants arrived in Canada, but by 1935, that number dropped to less than 12,000. For the rest of the decade, immigration remained low, never going above 17,000 a year. During this time, many European Jews who were fleeing Nazi Germany were denied entry to Canada.
The number of people being deported from Canada also increased. In 1929, fewer than 2,000 immigrants were sent back to their countries, but by 1933, that number had risen to more than 7,600. Over the course of the decade, nearly 30,000 immigrants were forcibly returned, mostly due to unemployment or illness.
At the same time, Canada’s birthrate fell. In 1930, there were 13.1 live births for every 1,000 people. By 1937, this had dropped to just 9.7. This was the lowest birthrate Canada had seen until the 1960s.
As a result of the tough economic times, more people started leaving cities and returning to rural areas. Many of the unemployed found it easier to survive in the countryside than in cities where relief was scarce. The trend of moving to cities, which had been happening for the past 50 years, started to reverse.
How the Mortgage System Worked Before the Depression
Before the 1930s, mortgages in Canada were very different from what we know today. There were no federal programs to help people buy homes. Banks and private lenders set their own rules, and those rules were often tough.
Here’s how things worked:
- Mortgages were short-term, usually 3 to 5 years
- Borrowers had to make large down payments, often 50% of the home’s value
- There were no long-term fixed rates – interest could jump
- Loans had to be renewed frequently, creating uncertainty
- If you missed a payment, you could lose your home quickly
Only the wealthy or well-connected could afford to buy homes. Working-class families often rented or shared housing with extended family. There was no central system to help stabilize home lending across the country.
This all changed after the economic crash. As more Canadians defaulted on loans and lost their homes, the weaknesses in the mortgage system became clear.
How Did the Great Depression Shape Canada?
The crisis changed Canada in many ways. It shifted the country’s policies, politics, and how people thought about the role of government.
- Government Intervention
Although the impact of early organizations during the Depression was limited, it did lead to a bigger role for the government in the economy and social welfare. In 1934, the Canadian government passed the Bank of Canada Act, which led to the creation of the Bank of Canada in 1935. The bank’s job was to manage the country’s money supply and interest rates to keep the economy stable.
That same year, the government also set up the Canadian Wheat Board. This board controlled the marketing of wheat and set a minimum price to protect farmers from price drops. In 1940, the government took a major step by introducing a national unemployment insurance program. This program helped the unemployed by providing financial support and offering job services to those looking for work.
The Depression also brought attention to the ideas of British economist John Maynard Keynes. He believed that if private businesses couldn’t create enough jobs, the government needed to step in and invest in public projects to create employment. This idea led to reports such as the National Employment Commission report (1938) and the Royal Commission on Dominion-Provincial Relations (1940). The latter played a key role in the idea of equalization payments, where the federal government would support poorer provinces with financial aid.
Although these ideas were discussed during the Depression, it wasn’t until the Second World War began in 1939 that they became a key part of Canadian policy. The government’s large spending to support the war effort helped reduce unemployment to very low levels by 1942.
- National Housing Act (1938)
In 1938, the federal government passed the National Housing Act (NHA). This was a major turning point.
The act aimed to:
- Encourage the construction of affordable housing
- Improve housing conditions across Canada
- Make mortgage loans more available and secure
The NHA also led to the creation of government-backed mortgage insurance. This made banks more willing to lend to average Canadians, because the risk was lower. Over time, this helped home ownership rise.
Later, in 1946, the government created the Central Mortgage and Housing Corporation (now called Canada Mortgage and Housing Corporation or CMHC). Its job was to oversee housing programs and support the development of Canada’s housing market.
- Changed Political Climate
The Great Depression changed how Canadians viewed the economy and the role of the government. Before the Depression, many believed that a balanced budget, a strong currency, and changes to trade tariffs would help the private market recover on its own. This was the general belief of both Prime Minister Bennett and King’s governments, as well as most economists at the time.
However, the tough times sparked several new political movements. Many of these movements emerged at the provincial level, calling for more government involvement in the recovery process. Some of the key movements included:
- William Aberhart’s Social Credit theories in Alberta, which sought to provide financial help to the people through currency reforms.
- T. Dufferin Pattullo’s “Work and Wages” program in British Columbia, which aimed to create jobs and provide wages for the unemployed.
- J.S. Woodsworth and the Co-operative Commonwealth Federation (CCF), which pushed for democratic socialism, focusing on wealth redistribution and public welfare.
Other political movements also emerged, such as Maurice Duplessis’ Union Nationale in Quebec, H.H. Stevens’ Reconstruction Party, and W.D. Herridge’s New Democracy movement. During this time, the Communist Party of Canada was almost completely banned from 1931 to 1936, with several leaders arrested for being part of an “unlawful association.” The party was officially banned in 1939 when World War II began. However, many groups connected to the Communist Party played an important role in organizing protests and marches for the unemployed and unskilled workers. These groups included the Workers Unity League, Jeune-Canada, the League for Social Reconstruction, and the National Unemployed Workers Association.
More: The 1980s Canada Mortgage Rates Crisis: Lessons for Today’s Market
Going Forward
The Great Depression exposed major problems with early Canadian mortgages, which often had short terms, high down payments, and left homeowners vulnerable to foreclosure. In response, the government introduced changes like the National Housing Act, helping create longer, more stable, and insured mortgages that made homeownership more achievable. These reforms shaped the modern mortgage system Canadians benefit from today.
Thinking about buying, renewing, or refinancing in Ontario? Get in touch with Fusion Mortgage Group today by calling 289-723-2126 and let’s find the right mortgage solution for you.