According to the Globe and Mail
Sometimes, recessions can breed a hunker-down-and-save mentality.
Not so this time. Canadian household debt – a perennial worry in recent years – has ballooned to a point where it’s now more than double 1989 levels – just as rising borrowing costs are set to squeeze budgets, a national report cautioned Tuesday.
Household debt in Canada reached a record $1.41-trillion in December. If that was spread among all Canadians, each person would carry more than $41,740 in outstanding debt – an amount 2.5 times greater than 1989, according to a report by the Certified General Accountants Association of Canada.
And Canadians are okay with taking on still more debt. Nearly 60 per cent of respondents whose debt had increased through the recession – and 92 per cent whose debt decreased or stayed the same – still felt they could either manage it well or take on more debt.
It’s not looking good for mortgages either.
Mortgage rates – which have been trimmed in recent days – are higher than the start of the year, and poised to rise further as the Bank of Canada readies for a rate hike in the next month or two.
If mortgage rates rise by 2 percentage points, mid-income to mid-to-high income families may have to cut about 10 per cent from other expenditures if they want to maintain the same level of spending on shelter, taxes, food and transportation, the report said.
A separate report yesterday said almost half a million more mortgage holders would be in trouble if their rates hit 5.25 per cent. The study, by the Canadian Association of Accredited Mortgage Professionals, said about 375,000 mortgage holders “are already challenged” by their current payments.
