Tag: debt levels

MORTGAGE ISSUES BREWING: CANADIANS ARE SERIOUSLY FALLING BEHIND ON DEBT

Post author By Brandon Smith
Post date May 15, 2023

Mortgage issues: Introduction

As per the latest findings from the Royal Bank of Canada (RBC or RBC Economics), a significant proportion of Canadians are currently grappling with debt payments, thereby heightening the risk of mortgage default in the future. The report reveals that the average Canadian owes $1.77 in debt for every dollar of disposable income, a trend that has been steadily increasing over recent years. This development is particularly concerning given the rising interest rates, which are exacerbating the difficulty of maintaining timely payments.

This Brandon’s Blog will explore the RBC report, the truth about household debt, including mortgage debt, in Canada, whether or not we are already in trouble and its implications for Canadian households.

The impact of rising interest rates on mortgage and other debt payments

The RBC report clarifies the negative impact of boosting the rate of interest on debt payments for Canadians. With the way we have seen the rate of interest growing, numerous Canadians are finding it significantly testing to handle their debt payments, specifically those with a variable-rate mortgage or loan product taken out at interest rates at pre-pandemic levels or credit card debt.

Interest rates have risen significantly, with the Bank of Canada’s Target Overnight Rate going from 0.5% in March 2022 to holding at 4.5% since January of this year. Anyone faced with renewing their mortgage is going to be in for a bit of sticker shock. The report also highlights a concerning pattern where a substantial number of Canadians are unprepared to handle the prospective fallout of rising interest rates on their ability to meet their financial obligations.

This RBC report highlights the expanding degree of debt among Canadians, which could potentially cause mortgage issues down the line. As more Canadians battle to keep up with their debt payments, RBC’s experience states that it is most likely that they might start missing mortgage payments. This could lead to serious consequences, such as the loss of their home or even bankruptcy. What’s even more, the report reveals that numerous Canadians are blissfully unaware of the possible dangers related to lugging around high levels of debt.

Understanding Household Debt in Canada

In order to attain a comprehensive comprehension of the ramifications of Canadian household debt, it is imperative to precisely define it. Household debt encompasses the aggregate sum of all financial obligations owed by Canadian households, including home mortgages, credit cards, lines of credit, and vehicle loans. Data released by the Bank of Canada indicate that the customary household debt-to-income ratio has been consistently escalating over the past few years, indicating a trend that is no longer just a blip.

This trend signifies that Canadians are taking on increasingly greater financial obligations in relation to their income. Coupled with the effects of inflation, it is apparent that, on average, Canadian household income is insufficient to meet the customary familial expenditures, resulting in families incurring more debt to maintain their standard of living.

Substantial household debt poses several possible risks to the Canadian economic climate. First of all, it can cause economic instability for Canadian households as they endeavour to satisfy their financial obligations. Second of all, increased degrees of financial obligation may result in a reduction in consumer spending, therefore negatively impacting the overall economy. Finally, households with elevated debt levels will likely be extra prone to default as the rate of interest hikes happens, potentially causing a cascade of defaults throughout the Canadian economy.

Canadians expect signs of trouble in the Canadian economy

Recent data indicates prospective problems surrounding Canadian household debt. In a survey of Canadians carried out by the Bank of Canada between January 27 and February 16, 2023, with follow-up interviews in March 2023, numerous key findings were uncovered.

The key findings were:

Assumptions for the rising cost of living in the coming 1 to 2 years have declined but continue to be dramatically greater than in the pre-COVID-19 period.
While consumers have reduced their price increase expectations for certain goods, such as commodities, inflationary assumptions for services such as rent stay raised.
A majority of consumers believe that the Bank of Canada faces obstacles in successfully lowering inflation because of high government spending and also ongoing supply chain disruptions. However, many remain hopeful that supply chain issues will be fixed within the next two years, resulting in reduced product prices influenced by the disruptions.
Alternatively, those that watch high federal government spending as a relentless inflationary force expect continued interest rate stress in the long term.
The present economic environment is characterized by elevated inflation and also a higher pattern of interest rates, which has actually resulted in installing strain on Canadians, especially those that are making monthly mortgage payments. Consumers are spending less on non-essential services, including leisure travel, eating in restaurants, as well as various other recreational activities.
A considerable majority of Canadians view an economic downturn to be one of the most potential end results for the Canadian economy within the following year. Nonetheless, many people continue to be uncertain regarding the direction of the economy, the labour market and unemployment rates. Such uncertainty has actually caused a tendency amongst consumers to reduce spending and increase savings as a preventative measure.
In spite of economic obscurity, workers show a favourable outlook on the job market, with several certain they could find new employment opportunities, especially those who are discontent with their present jobs. Private sector wage increase expectations are near an all-time high among employees.
Nonetheless, wage growth is expected to fall short of the rising cost of living, with most workers predicting their wages or salary will not equal current inflationary trends in the coming year.

Principal reasons for mortgage issues in Canada

Amidst the prevailing economic conditions, numerous homeowners are facing considerable difficulty in maintaining the escalating expenses associated with owning a home. Consequently, there is an anticipated surge in the number of defaulted mortgage payments in the forthcoming months. This trend is a source of apprehension for both homeowners and lenders.

As per the RBC Economics report, the principal reasons for mortgage-related issues in Canada are:

The rising cost of homeownership includes rising property taxes, insurance costs, and maintenance expenses.
Job loss or reduced income.
Reduced economic growth.
High household debt.
Increasing interest rates. This is especially true for homeowners with variable-rate mortgages, as their payments can fluctuate over time.
Unanticipated expenditures and low or no savings or emergency funds. Some homeowners may have taken on too much debt or purchased a home that was too expensive for their budget. In these cases, failed mortgage payments are almost inevitable.

The RBC report sustains the findings of the Bank of Canada study. It mentions that this might be due to a mix of elements, including climbing living expenses, stationary wage growth, and the high cost of housing. The repercussions of this could be extreme, affecting not only specific homeowners and their personal finances but the entire Canadian economic situation.

RBC states that it is critical that lenders, regulators, as well as policymakers, interact to address this problem effectively. Financial education, government programs and support for those dealing with financial debt can help protect against mortgage issues and defaults.

Consequences of mortgage issues in Canada

Failed mortgage payments can have significant consequences for both homeowners and also for mortgagees. For homeowners, missed payments can result in the power of sale or foreclosure process. This results in the loss of their house.

Potential lending institutions scrutinize credit history and also credit score prior to approving loan or mortgage applications. Uniformity in making payments is essential as it contributes to keeping a healthy credit rating. So being delinquent on debt and home mortgage payments and especially the loss of your house has a considerable unfavourable effect on your credit score and your capacity to get loans in the future.

The financial and mental stress of these mortgage issues cannot be overemphasized. It is vital that Canadians take positive steps to deal with their debt properly. The RBC report stresses the significance of looking for guidance and assistance from trustworthy financial specialists to help you be able to deal proactively with your debt problems before it is too late. By following this guidance, Canadians can protect their financial well-being and also avoid possible home mortgage problems in the future.

Delinquent mortgage and loan repayments can result in economic losses for lenders. Due to their reliance on periodic payments to sustain their operations, any missed payments can cause significant disruptions to their cash flow. This is particularly true for smaller lenders with limited resources as compared to larger organizations. When a substantial portion of a lender’s portfolio consists of delinquent and non-performing loans and mortgages, it can lead to a cessation of operations.

Coping with household debt and mortgage Issues: What Can Homeowners Do?

The RBC Economics report underscores the significance of proactive debt management by Canadians. While elevated levels of household debt may trigger apprehension, there are measures that individuals can undertake to mitigate the risk of financial ruin. One crucial approach is to look carefully at your personal finances and devise a budgetary plan and adhere to it. This can assist households in identifying superfluous expenditures and making necessary adjustments.

Furthermore, households ought to prioritize the repayment of high-interest non-mortgage debts such as credit cards. CTV News reported that non-mortgage debt is up by 5.4% when comparing the fourth quarter of 2022 to the same time in 2021. Seeking the guidance of a financial expert in developing a debt management strategy can also prove advantageous.

In the event of mortgage payment difficulties, there are several prudent measures that homeowners may take to forestall losing their homes. Firstly, contacting the lender and providing details of the financial predicament may yield positive outcomes. Numerous lenders extend hardship programs that facilitate a reduction in monthly payments or an interim suspension of payments.

In the event that you have an insurmountable challenge of making home mortgage payments and the looming threat of losing your home, it may be a good idea to very carefully consider the option of selling your residential property. By doing so, you can properly avoid the damaging end results of defaulting and losing your home and ultimately embark on a clean slate of living in a more affordable home.

All of these recommendations can be found in my May 1, 2023, Brandon’s Blog “MAXED OUT CREDIT? YOU NEED TO KNOW HOW TO INCREASE CREDIT SCORE: OUR 13 INTRIGUING TIPS TO IMPROVE YOUR CREDIT SCORE”.

However, if things have gotten out of control and your creditors are already pounding at the door, making harassing collection calls and possibly even suing you, you need to take immediate action. Contact me anytime by phone or email.

Mortgage issues: Conclusion

The RBC report has brought to the fore the intensifying concern of Canadians back-pedalling on their debt payments. The scenario is rather disconcerting, specifically given the surge in the rate of interest that pose a formidable challenge for Canadians to stay current with their financial obligations.

In addition, higher interest rates and the price of necessities of life have increased concerns about the surging debt levels amongst Canadians and the possible difficulties that could arise in the home mortgage market in the future. It is imperative that Canadians take aggressive measures to address their financial debt management strategies and appropriately plan for the ramifications of this new higher interest rate environment.

I hope you enjoyed this mortgage issues Brandon’s Blog.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind. Coming out of the pandemic, we are also now worried about the economic effects of inflation and a potential recession.

The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.

It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy proceedings. We can get you debt relief now.

We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.

We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.

Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.

Brandon Blog Post

DEBT AND UNPOPULAR INTEREST RATE HIKES, HOW IS THE ECONOMY FARING?

Post author By Brandon Smith
Post date May 30, 2022

What is the definition of debt?

Debt is the money that a person or company owes to others. That is the simplistic definition. It is really one of life’s most stressful parts. Some people grow up in debt. For them, it’s just part of their lives, and they can make it work. Others live from paycheque to paycheque and save little to nothing. For them, it is crippling and can consume their lives, making their existence a daily struggle. For others, it is a parasite, feeding on their mind and their body. It can destroy their life, pulling them down and limiting their options and choices.

Consumer debt and household debt come from a number of places. Some source of debt is from emergency situations, and some of it is from buying expensive things but useful and worth the cost. That is how people have viewed real estate over the last decade, especially during the unprecedented pandemic. However, I also see some situations where high levels are just from bad decisions.

Business loans and corporate debt come in handy for a number of reasons. Perhaps you need some extra cash to get your business up and running. Or, maybe you’re looking to expand your operations by opening a new branch or purchasing new equipment. In any case, a business loan can provide the funds you need to reach your goals. Or, like in the last 2 years, perhaps the bottom has fallen out of the economy due to the COVID-19 pandemic and in order to survive, the business has had to take on government-support loans to increase the business debt load substantially.

All of these are now coming together in a perfect storm, as the Bank of Canada attempts to battle inflation and high Canadian real estate prices by beginning a pattern of interest rate hikes.

In this Brandon’s Blog, I look at how interest rate hikes, higher Canadian household debt and more Canadian business bankruptcies are the most recent signs of the Canadian consumer debt burden, as well as the major indicator of the current state of business in Canada. debt

Policy Interest Rate – Bank of Canada

The Bank of Canada’s primary business is to conduct monetary policy for the Canadian economy. This means that the Bank uses its tools of monetary policy to try to hit its target for inflation, which it does by adjusting the Bank of Canada’s policy interest rate. The Bank of Canada’s policy interest rate is the rate at which it lends money to financial institutions.

At the beginning of March, the Bank of Canada increased its target for the overnight rate to 1%, with the Bank Rate at 1¼% and the deposit rate at 1%. This Fed interest rate hike was the biggest increase in two decades. The reason? To fight inflation.

The world’s biggest central bankers have long argued that ultra-low interest rates encourage spending and investment, helping to boost growth and employment. So at the outset of the pandemic with the world economies in tatters, all major central bankers, including the Bank of Canada, set borrowing costs at record lows. Those actions, amongst other things, contributed to the current state of inflation in the economy.

Macklem won’t rule out an inflation-driven, super-sized rate hike

The central bank predicts that inflation will remain high, averaging almost six percent in the first half of this year and remaining elevated in the second half of 2022. It is expected to ease in the second half of next year before returning to the two-per-cent target in 2024.

What are the factors causing this inflation? The global financial situation has become more difficult and unpredictable. Prices for oil, natural gas, and other commodities have risen sharply, contributing to inflation in many parts of the world. Supply disruptions resulting from Russia’s invasion of Ukraine have caused the prices of energy and other commodities to increase even further.

Looking to the future, Bank of Canada Governor Tiff Macklem stated that the Bank will be taking another 50-basis-point step which has already been baked into the financial markets. He believes that the economy needs higher rates and can handle them. It is evident that Macklem is dedicated to using Canada’s policy interest rate to bring inflation back to target. As inflation continues to surge to new highs, an even bigger interest rate hike may be on the horizon. Bank of Canada Governor Tiff Macklem indicated that further and faster rate hikes could be necessary to keep inflation in check.

The problem is that Canadian inflation is as much from a global impact as it is local. Raising interest rates may slow down home buying and mortgage growth. While it is true that mortgage debt is Canadians’ single largest obligation, increasing interest rates won’t fix the sky-high pricing at the gas pumps and the supermarkets. debt

As interest rates increase, so is household debt!

The latest figures from Statistics Canada, the agency responsible for collecting and disseminating statistics related to the economy of Canada, indicated that the total amount of household debt in the country increased by 0.5% in March 2022, up $14.4 billion to $2.69 trillion.

The increase of $13.2 billion came largely from debt related to the real estate market, such as mortgage borrowing and home equity lines of credit (HELOCs). This amount totalled $2.16 trillion outstanding. However, Statistics Canada also reported that credit card debt has increased for the second consecutive month, growing at a faster rate than mortgage debt!

Now as the Bank of Canada embarks on a hiking cycle that could go faster and further than before, and sky-high inflation squeezes household budgets, economists and capital markets are once again raising the red flag.

In a recent poll, 31% of Canadians polled say they already don’t make enough to cover their bills and required payments. Economists look at the rise in credit card debt and attribute it to a rise in personal spending. This is true. However, with prices rising much faster than wages, the increase could be a troubling sign that Canadians are spending on basics by using credit to replace the money they do not have and will not have to repay the new rising liabilities.

The rising cost of debt payments is already putting a strain on Canadians

If you’re borrowing money, interest is what you pay to your lender for using their money. It is your debt cost. If interest rates go up, the amount you have to pay each month for a mortgage, line of credit, or other loans with variable interest rates will increase. The minimum payment required each month on variable rate loan products will increase as interest rate hikes continue. At some point, you’ll also need to renew a fixed interest rate mortgage or loan. When interest rates are rising, the renewal rate on the fixed debt cost will be higher.

Raising borrowing costs to quell rising consumer prices may pose some risks, especially since Canada has a high level of household debt. In terms of household debt to income, Canada ranks 4th highest in the world. debt

What are the most effective ways to reduce your debt?

Paying down debt as much as possible will help counter the effects of a rise in interest rates and provide you with much-needed debt relief. Here are some of the best ways to reduce your debt burden thereby improving your credit score and credit rating:

Cut up your credit cards and only use cash for an extended period of time until things are back in control.
Make a budget and stick to it.
You should have an emergency fund to pay for unexpected expenses arising from external events out of your control.
Create a payoff plan. Look at your various categories of debt and make a plan that is most realistic for each type of debt.
Save money on interest by paying down the outstanding amount with the highest interest rate first.
Debt consolidation. Consolidate your liabilities with the highest interest rates into a single loan with a lower interest rate. By keeping your payments the same, and paying more than the monthly minimum payment, you’ll be able to pay it off faster and save money in the long run.
Avoid getting the biggest mortgage or line of credit that you’re offered.
Get a part-time job or begin a side hustle to boost your income.
Think first about how borrowing more money could impede your ability to save for future objectives.
Speak to a financial advisor or one from a wide variety of other financial professionals to find out how to teach you how to create a plan to be debt-free.

What will happen now with external debt and business bankruptcies?

As businesses continue to experience insolvencies, it’s important to note that the Canadian business bankruptcy rate is on the rise, according to a recent report by Statistics Canada and the Office of the Superintendent of Bankruptcy Canada. This increase underscores the importance of taking measures to protect your business from financial hardship.

Business bankruptcies in Canada increased by almost 34 percent year-over-year in the first quarter of 2022, which some experts warn could be the start of a growing wave of failures. This is closer to pre-pandemic levels. The number of business bankruptcies and proposals increased in the first quarter of 2022, with 807 cases compared to 733 in the previous quarter and 603 in the first quarter of 2021.

Business bankruptcies in Canada are increasing as government support comes to an end and businesses face a difficult post-pandemic recovery with high costs, supply chain problems and a shortage of workers. The financial support provided by the government through the COVID-19 pandemic assisted in delaying the surge in bankruptcies. Funding sources are becoming more expensive also.

Small business owners are feeling increased pressure from inflation in comparison to the average Canadian. With each budget line costing more, filing for bankruptcy is often the only option left. The data doesn’t capture the number of insolvent businesses that are forced to close without any formal filing, but the trend is now becoming evident.

Do you think that debt levels and bankruptcy filings will surpass pre-pandemic levels?

The state of the economy and how inflation and supply chain issues are managed will determine if the number of bankruptcy filings will rise in the coming months or not. As you can see, inflation, supply chain issues, interest rate hikes, household debt problems, business owners searching for more solutions and business bankruptcy filings are all now coming together in a perfect storm.

I hope this Brandon’s Blog on the current state of Canadian interest rates, household debt and business bankruptcies was helpful to you in understanding more about the corporate bankruptcy system in Canada.

If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

Call us today and get back on the path to a healthy stress-free life. debt

Brandon Blog Post

CANADIAN CONSUMER DEBT: NEW REPORT SHOWS COVID-19 INSPIRES INCREASE IN CANADIAN MORTGAGE DEBT

Post author By Brandon Smith
Post date December 2, 2020

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting. We hope that you and your family are safe and healthy.

Canadian consumer debt introduction

On November 30, 2020, Equifax Canada reported that total Canadian consumer debt climbed 3.8% to $2.041 trillion in the third quarter of 2020 compared to the third quarter in 2019. Canadian household average debt is extremely high.

The purpose of this Brandon’s Blog is to discuss what Canadian consumer debt is, what Canadian households have been doing with credit use during the pandemic and what the Equifax Canada reporting means for household debt.

The pandemic can’t stop Canadian consumer debt increase

The reporting indicates that the rise in Canadian consumer debt came mainly from debt growth in mortgage debt and auto loans. Mortgage balance increases came from both refinancings of existing mortgage debt and new mortgage applications.

The thinking with auto loans is that it resulted from Canadians purchasing vehicles that they had intended to purchase earlier in the year. Concerning mortgages, the refinancings were to consolidate higher interest rate non-mortgage debt, for credit products such as credit cards, into a new higher mortgage amount at much lower interest rates.

This obviously brings down the overall average debt interest rate. The new mortgages are tied directly into Canada’s housing market that the pandemic, so far, could not stop either.

All this has taken place with the backdrop of businesses closing and jobs being lost because of the pandemic. As well, millions of Canadians took advantage of payment deferrals on loan payments, especially mortgage deferrals on home mortgages. Finally, Equifax points out that the largest growth in mortgages came from those 35 years of age and under.

So you although you would think that the pandemic, business closures and job losses would result in an overall Canadian consumer debt increase due to hardship, that is not the case. The rise in Canadian consumer debt has been very focussed and is more about an opportunity for those that have maintained a good income.

While mortgage and auto loans increased, other non-mortgage debt products, such as credit cards and unsecured lines of credit, showed net decreases in outstanding balances. The reason for this is that with Canadians working from home and otherwise staying home while receiving government subsidies, they are spending less. On average, on a net basis, that means Canadians used some of their money to pay down non-mortgage Canadian consumer debt.

The debt-to-income ratio and Canadian consumer debt

On June 12, 2020, Statistics Canada reported that the debt-to-income ratio hit an all-time high of 178% in late 2017. The Statistics Canada report in June 2020 said it was at 177%.

The debt-to-income ratio is the degree of just how much financial obligations a household has, compared to its disposable income. That is, the money you have readily available to spend or invest, on an after-tax basis.

A ratio of 177% means that, throughout all Canadian families, we jointly owe $1.77 for every single dollar of disposable income we have. So that means on average, household debt as compared to household disposable income is very close to the all-time high.

What are the consequences of the debt-to-income ratio and Canadian consumer debt?

The general agreement is that too much Canadian consumer debt makes households financially susceptible. If you’re a financial policymaker, such as the Bank of Canada, you worry that too much debt makes the Canadian economic climate much less resistant to future economic shocks. One of the things worrying the Bank of Canada was expressed recently by Deputy governor Toni Gravelle “that fear hasn’t played out during the pandemic, despite it being the worst downturn since the Great Depression.”

At the personal level, we are likely concerned not with macroeconomic principles, but rather, can we afford to make our monthly payments and delinquency rates. Canadians generally, and unfortunately, do not consider what would happen to their ability to pay if something unexpected occurs such as increases in the rate of interest, or the loss of your job.

Using debt is also correlated with optimism regarding our financial futures. Individuals that expect their financial situation to improve are far more likely to be willing to take on more financial debt. Statistics Canada research reveals that individuals’ assumptions concerning their financial circumstances are strongly correlated with both their amount of total Canadian household debt and their debt-to-income ratio.

Even the most optimistic households, however, are still subject to borrowing rules set by financial institutions. The increase in mortgages, be it a refinancing or a new mortgage, is obviously by people who can meet the borrowing rules. Lenders look at the household’s debt service ratio. This calculation suggests to lenders what the household’s capability to make its debt payments according to the repayment schedule is.

So what this tells me is that the housing market, especially the hot expensive cities of Vancouver and Toronto, is being fuelled by those who have good jobs and who can work from home. Probably white-collar jobs and professionals who see the combination of super-low interest rates, their household debt and debt-to-income ratio as an opportunity. They are not as worried about their debt levels or average debt. They are optimistic about taking on more consumer credit.

Are there dangers with the current level of Canadian consumer debt?

Those who have lost their jobs or business are not buying more expensive homes. Those whose hours are constrained by the pandemic also are not the ones buying. So this highlights a divide in the Canadian economy. Those who can afford to view this pandemic as a financial opportunity vs those who are barely hanging on not knowing how they are going to make next month’s rent payment.

The statistics show that 12% of brand-new loans were by Canadians already taking advantage of payment deferral programs. So presumably, those who took advantage of mortgage deferrals in particular also took advantage of credit use for the opportunity I would guess to refinance other household debt.

They rolled higher rate non-mortgage Canadian consumer debt into much lower rate mortgage debt. Another financial opportunity for those with enough income to meet the lender’s borrowing requirements. This produced growth in mortgage debt but a decline in mortgage delinquency rates.

But there is also the other end of the economic scale. Recently, Prosper Canada, a national charity dedicated to expanding economic possibilities for Canadians living in poverty with program and policy innovation, released its report titled “Roadblock to Recovery: Consumer debt of low- and moderate-income Canadians in the time of COVID-19″.

This report shows the effect of household debt on low-income families. The reports main findings are:

Many, but not all, low and moderate household income families carry debt.
Low household income families spend an average of 31% of their incomes repaying debt, while moderate household income families spend an average of 18%.
Fewer low household income families have debt loads backed by assets than their higher-income counterparts. Only 20% of indebted low-income households and 39% of indebted moderate-income households carry mortgage debt.
Fifty-nine percent of indebted low household income families and 56 percent of indebted moderate-income households carry some amount of credit card, unsecured lines of credit and/or installment loan debt, making this the most common type of debt among these households.
Twenty-four percent of indebted low household income families carry student loan debt compared to just 15% to 17% of households at other income levels.
For many households, especially those outside urban centres, automobiles are a necessity of life. However, auto loans pose several risks to low- and moderate household income borrowers with low credit scores.
Financial counselling support for insolvent borrowers is of uneven quality and there are few sources of free, quality financial debt counselling available to Canadians struggling to avoid insolvency. These groups also have no financial plan.

Canadian consumer debt patterns show there are two economic Canadas

The COVID-19 pandemic has actually highlighted in plain terms exactly how unprepared most Canadians are to weather a major economic shock. The above-noted studies show in stark terms that there are at least two economic Canadas.

The first are those who can afford to refinance their mortgage or buy a home to get a new mortgage. The other Canada has lost jobs, businesses and are low to middle income. The low to middle-income groups are in financial trouble and their Canada consumer debt is generally not backed by assets.

However, those who might experience financial problems are not limited to one of the groups. Those who do the refinancings and new mortgages are buoyed by their own optimism for the future. They may tend to just keep taking on more debt. They are not prepared for an unforeseen shock. They will not realize that they are in trouble until they hit the wall.

How do you know if your Canadian consumer debt is a problem?

There are several warning signs that your Canadian consumer debt is a problem. Major indicators are:

Your bank account is overdrawn every month.
You are using credit cards for daily expenses.
You have already taken on payday loans and have started to receive collection telephone calls.
Your debt levels are rising are about to hit the maximum of all of your credit lines.
You are behind on your loan payments.

If you see your debt levels will soon be out of control, the time to act is now. Contact me and I will review your situation and provide you with a financial counselling session at no cost to you.

Canadian consumer debt summary

I hope you have enjoyed this Canadian consumer debt Brandon’s Blog.

Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a debt settlement plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation.

We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

Tags average debt, bank of canada, Canadian consumer debt, Canadian household debt, consumer credit, credit card debt, debt levels, debt service ratio, debt-to-income ratio, delinquency rates, Equifax Canada, household average debt, household debt, Ira Smith Trustee, Lines of Credit, mortgage debt, mortgage deferrals, non-mortgage debt

Brandon Blog Post

CANADA IN RECESSION: WILL THE ECONOMY FALL INTO A GREAT DEPRESSION?

Post author By Brandon Smith
Post date July 6, 2020

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

**If you would prefer to listen to the audio version of this Canada in recession Brandon’s Blog, please scroll down to the bottom and click on the podcast.**

Canada in recession introduction

It’s official. C.D. Howe Institute has declared that Canada in recession because COVID-19 is now a reality. Canada’s economy is in a recession. Nouriel Roubini is a world-known economist and a professor of economics at New York University’s Stern School of Business. He accurately forecasted the credit crisis of 2007-2008. He has some stark current thoughts on just how bad the Canadian economy can go. He has written and talked at length lately about the components that could take Canada in recession to a depression.

Canada in recession – When will there be a recovery?

Dr. Roubini sees three possible scenarios for how things are going to develop in the global economy. He says:

His baseline assumption for North America this year is one of a U-shape recovery.
The equity markets in the US are pricing in a V-shaped recovery with very strong growth in the second half of the year into next year.
There is a risk of a greater depression for the rest of the decade but not for this year.

He believes there are forces that are going to lead Canada into a depression. His view is that there is going to be a U-shape recovery because this is a global shock. Both households and corporations will have to spend less and save more. Precautionary savings are going to go higher. Income is going to be lower. This will translate into less business capital spending. He says there will be a global investment slump because of a global savings glut.

That is a recipe for a very anemic recovery.

Could external forces push the US and Canada in recession into a depression?

The question is how long and how deeply related to this crisis the recession will be? Although in the short term there is Canada in recession, later in the decade is when there will be a price to be paid. That potential for depression and deep slump happens later in the decade as a result of fear and panic leading people and companies to save more and spend less.

So, what can governments do to stave off a worse depression? Dr. Roubini is very pessimistic and believes a greater depression will happen sometime later in the decade. He believes it is only a matter of when and not whether it will happen.

He describes the North American economy as a train wreck in slow-motion. It won’t happen this year but there are fundamental forces like debt and deficits leading people and businesses to insolvency. There will be an inability to fund liabilities coming from demographics that become worse. There will be deflation that is going to make more people insolvent. The need for quantitative easing will debase currencies. The need will be because of the large fiscal deficits that eventually are going to lead to inflation by the middle of the decade.

There is also digital disruption because manufacturers will have to substitute labour with the capital in equipment and technology because businesses will have to cut costs to save more and spend less. That implies more automation and more robotics; especially if we are going to try to lessen our dependence on China for goods.

We are in the process of a democracy backlash. People who are scared are becoming more populist and will try to elect authoritarian populist governments to come to power all over the world. Relations with China will probably become colder because of the coronavirus related anger towards China. It is going to get very ugly.

There will be digital rivalries including cyber warfare. It will get worse over the next few years. This is the way warfare is going to be. It will not be the conventional words the enemies of the Western Hemisphere be it China, Russia, Iran or North Korea. They cannot fight the USA using conventional weapons.

Events in the 2016 US election and the COVID-19 pandemic in 2020 shows our enemies that they can use cyber and biological war to successfully weaken the North American economy and create societal problems. They will continue to interfere with the US democratic process and use man-made disasters. Pandemics and global climate change are two things they can weaponize to try to destabilize our way of life.

This has the potential to make us wind up into a great depression. Government fiscal policy cannot do much about it. That is not the tool we need to fight these new threats.

What about internal forces pushing the US and Canada in recession into a depression?

One huge issue is the debt level; both personal debt and sovereign. We are in way over our heads. We were before this crisis. In terms of how we get out of it is there a natural path that would resolve it? It doesn’t seem clear right now because governments are having to spend trillions of dollars to keep their economies afloat during the coronavirus pandemic. What has kept things in check prior to the pandemic is that interest rates were close to zero, if not negative, like in Europe and Japan. The current economic environment is going to make it impossible for governments to change the historically low-interest rates for the foreseeable future.

I have written many times before discussing different issues relating to record high Canadian household debt levels. The debt levels are the single most internal reason why Canada in recession could become Canada in depression.

Canada in recession summary

I don’t mean to be pessimistic when talking about Canada in recession. However, today, I just don’t see any silver lining. I am sure there is one, I just can’t see it right now.

I hope you have found Canada in recession Brandon’s Blog interesting and helpful. The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID-19, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Tags C.D. Howe, Canada, canada in recession, capital spending, coronavirus, coronavirus pandemic, covid-19, covid-19 pandemic, Debt, debt level, debt levels, household debt, insolvency, interest rates, Ira Smith Trustee, Nouriel Roubini, personal debt

Brandon Blog Post

LOANS TORONTO NO CREDIT CHECK: A DEBT SOLUTION?

Post author By Brandon Smith
Post date June 5, 2014

I never realized that loans Toronto no credit check was such a popular topic. I want to tell you about three experiences that I had in the past few days. They are all separate, yet all related.

Revelation #1 – You can’t even buy beer with bad credit!

Last Friday, we were having the whole family over for dinner. The weather was so warm and pleasant, that we were going to have a BBQ and eat outdoors on the back deck. I went to The Beer Store to pick up some additional beverages and when I went to check out, I had my first revelation. At the front of the line was a fellow paying for his beer by cheque. I never even realized that you could do that. The clerk inspected the cheque and then asked the gent for identification, and he produced his drivers licence. The clerk ran his information through The Beer Store’s electronic system and politely advised the gentleman that he has been declined to pay by ordinary cheque, and that he could only pay by cash, certified cheque or credit card. The man could not pay for his beer because of his bad credit and had to leave without his favourite brew. This man obviously has financial problems and has to solve them. How he wished he was able to get at that moment one or more loans Toronto no credit check so that he could enjoy his beer last weekend!

Revelation #2 – This man obviously was not alone needing loans Toronto no credit check

On the weekend I was looking at some analytics to see which of our blogs have been accessed the most over the last 30 days. To my shock (yes, notwithstanding our Firm has been helping people who have trouble living paycheque to paycheque and corporations in need of restructuring and turnarounds, I can still be shocked) the 4 most read blogs in the last month were::

There are obviously a lot of people concerned about their debt levels and looking for information on bad credit loans, payday loans, loans Toronto no credit check and how to tackle student loan debt. These blogs were not only the most viewed in the last 30 days, but our blogs on the topic of payday loans and bad credit loans are the most read. Obviously, there is a large demand in the Greater Toronto area for loans Toronto no credit check.

Revelation #3 – Our top searches are from people looking for loans Toronto no credit check

Yesterday I look at our analytics to see what were the top search terms that brought people to our blog and Firm website in the last 30 days. There were 221 visits to our website using the following search terms:

You don’t need me to tell you what this means. There are a lot of people with bad credit who are feeling pain in our society and believe that more loans Toronto no credit check is their solution. The amazing thing though is that rather than looking for bankruptcy alternatives such as consumer proposals, or if required, bankruptcy itself, these people are looking to borrow more money (apparently $5000 is a popular number) from high cost lenders.

These people are misguided in that they think that further high cost loans Toronto no credit check will solve their problem. I understand the way these people think. It is hard for us to face our challenges. Whether it is about our health, our family or our financial situation, it is difficult and painful to look at our problems straight in the face, especially if we are the one who created the problem. These people mistakenly think that taking on more debt is the solution.

Well, it is not. These people need to recognize that their credit score is so poor because of choices they have made in the past, and their behaviour has to change. Taking on more debt through loans Toronto no credit check is just more of the “same old same old”. They need to look at ways to budget so that their expenses are less than their income. They need to start saving to pay down debt. If they can’t do it on their own, then they must consult a licensed professional trustee who can discuss options with them: budgeting, bankruptcy alternatives such as debt consolidation or a consumer proposal or perhaps even bankruptcy.

There also needs to be a discussion regarding life after implementing the solution and working on improving their credit score. If any of this sounds like a situation you are in, taking on more debt through payday loans or loans Toronto no credit check is not your answer.

You need to contact Ira Smith Trustee & Receiver Inc. right away for a no charge consultation. You can even check out our bankruptcy faqs now online here. We will go over all of your options, and encourage and help you to implement the one that is right for you so that together we can solve your problems with immediate action and the right plan so that Starting Over, Starting Now will become your reality.