Canadians are currently facing a juxtaposition of a healthy economy and booming real estate market alongside an increase of national household debt. While some may wonder how this is possible, the connection is clear: many residents are simply borrowing too much and others are perhaps simply struggling to keep up with Joneses.
Markham, Barrie, Brantford, Hamilton, Oshawa, Pickering, St. Catharines, North York, Brampton or Toronto. On average, Canadian consumers now owe more than $22,000 before any mortgage loans are even incorporated. Despite the negative impression many have of millennials, it is actually gen Xers and baby boomers between 46 and 55 who have acquired the most debt. As of the latter half of 2016, overall consumer debt had increased across the country by over 3.5% from the year before, reaching more than $1.7 trillion.
Fewer People With Debt Are Accumulating More
We have heard continuous reports about Canadian debt increases over the last number of years, but the direction of the current trend may actually be somewhat promising. Fortunately, many individuals across the country are eliminating their debt or never had any in the first place. It seems most consumers are cutting back or borrowing wisely, leaving them with minimal or no money owing. However, those who do owe money seem to be accumulating more as they go, which indicates a continual mismanagement of their own finances. They are simply piling on more and more debt, and a significant enough amount to actually increase national consumer statistics.
Spending & Borrowing Trends
Another interesting aspect being reported is that those with the means to make purchases are buying more cars and, presumably, larger houses. Individuals are obtaining above seven percent yearly increases for their mortgages and cars in the process, but still avoiding overwhelming debt, including paying off entire expenses accrued on their monthly credit card statements.
Unfortunately, for those without the money to do so, luxury demand (particularly when it comes to homes) has risen despite their particular exclusion, ultimately keeping costs high. As the expression goes, it is difficult to break the habit and notion of “the poor getting poorer.” On the bright side, Equifax’s national delinquency rate―that is, when a borrower has not made a payment in over three months―only rose .09% from 2015 to 2016 for a total of 1.14 per cent by late last year.
Negative Impacts of Higher Average Debt
Although the Canadian economy is doing well, the growing average debt per person is a considerable cause for concern. The housing market, for one, has become so inflated and imbalanced that each level of government is attempting to intervene and the Office of the Superintendent of Financial Institutions has implemented stricter rules to deter against risky mortgages. The efforts should help to curb the increased national household debt, a result of the debt to disposable income ratio reaching almost 170 percent across Canada.
Toronto real estate is at an all-time high, with residents overextending themselves (even in some outskirt cities) by borrowing approximately 450 percent more for their mortgages than they possess in disposable income. While this may seem positive for homeowners, those trying to enter the market are in a particularly bad position. In addition, most people selling their home are looking to move to another and must endure the same inflation anyway when seeking a new mortgage. An increase in mortgage rates and long-term bond yields, an impact of the government regulations, will aim to correct these issues.
While many Canadians take pride in their homes and cars, borrowing too much for items beyond your budget is often counterproductive. Government intervention to help balance what has become an outlandish real estate market certainly seems necessary, but the impacts to help balance the economy will take some time to fully take effect.
Professional Debt Help Is Available
Individuals who are struggling with debt may benefit from seeking professional debt help in Ontario. While individuals who are having difficulty managing their money may benefit from taking precautionary steps to help avoid overwhelming debt in the first place, consulting with a financial expert is an effective, faster method for many residents who are clearly already facing household debt.
Contact Harris & Partners Inc. for Debt Solutions
If you are struggling with money issues now, a licensed insolvency trustee at our firm can offer you sound and practical advice. As financial and debt experts, we can review your specific circumstances and can recommend how to better handle your money or how to contain growing debt and reduce or eliminate it. If you are interested to learn about a consumer proposal as an alternative to a personal bankruptcy, contact us. Call us toll free now at 1-800-268-8093. We have offices in Markham, Barrie, Brantford, Hamilton, Oshawa, Pickering, St. Catharines, North York, Toronto, & Brampton.