(Release from Credit Counselling Society)
Statistics Canada revealed today that the household debt ratio has increased to 173.8 per cent of disposable income in the 3rdquarter of 2018. Despite the possibility of rising interest rates and stringent mortgage rules, it is concerning that Canadians are not scaling back on their spending or preparing for their futures.
“It is projected that the Bank of Canada will continue to raise interest rates, and many Canadians may find it difficult to keep up with rising mortgage and other debt payments,” says Scott Hannah, President of the Credit Counselling Society. “If there is a period of slow economic growth in the future, Canadians could face job losses or decreased income putting them in an even worse position to manage their increasing debt levels.”
Looking at the bigger picture, total Canadian consumer debt (including mortgages) climbed to $1.864 trillion in the 2nd quarter – a 5.4 per cent increase from $1.769 trillion in 2017 – according to an Equifax Canada report. “Higher interest rates, slower economic growth and a dampening effect on new mortgage volume will likely spur an uptick in delinquency rates,” the report stated.
In addition, Canadian cities with high debt to income (DTI) ratios are more vulnerable to rising rates and Vancouver, Toronto and Victoria had the highest debt to income ratios in Canada for the 2nd quarter, according to a recent report from Canada Mortgage and Housing Corporation. Comparing today’s DTI ratio to 3 years ago, Vancouver households had a ratio of 242 per cent (up from 226 per); Toronto ratio was 208 per cent (up from 189 per cent); and Victoria was 189 percent (same as before).
Nearly three-quarters (74 per cent) of Canadians are kept awake at night worrying about their financial situation, according to a poll by Royal Bank of Canada. “Unfortunately, we are not surprised by this statistic, as we hear from Canadians on a daily basis, who are not only struggling to manage their debt, but are unable to save money for an emergency fund or towards retirement,” says Hannah.
“It’s not too late to get help or to learn how to manage your expenses well in order to pay down debt or save for the future,” says Hannah. For Canadians struggling to get their finances back on track, the Credit Counselling Society provides free and confidential financial assessments. Our certified credit counsellors will discuss all available options to help Canadians get back on your feet.