What is average household debt in Canada?

Average household debt in Canada: the average of the amount of money that all Canadian adults in the household owe financial institutions.

Statistics Canada said that total household consumer debt, which includes consumer credit card and mortgage and non-mortgage loans, increased 1.2 per cent to $1.923 trillion at the end of last year. The total included $573.6 billion in consumer credit debt, including credit card debt, and $1.262 trillion in mortgage debt.

The growth helped drive the ratio of household debt to disposable income to a new peak of 165.4 per cent in the fourth quarter of 2015, up from 164.5 per cent in the third quarter.

It’s unbelievable but true – average household debt in Canada continues to rise! Unfortunately it seems that nothing has so far been able to stem this tide, particularly as already sky-high housing prices continue to reach new heights. We’ve reported on this very alarming situation in a series of blogs and the situation continues to worsen.

Video – Household Debt In Canada Crisis

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Household Debt; Canadian Levels Sound Alarm Bells

How is it affecting Canadians?

According to a ManuLife Bank survey:

33% of homeowners have been “caught short” at least once in the past year and didn’t have enough money to cover expenses
60% lack confidence that they’ll have enough savings for retirement
Average mortgage debt increased to $181,000 since last fall
25% of homeowners predict that their home equity will make up 80% or more of their household wealth when they retire

What are the options available to Canadian homeowners with limited retirement income?

Delay retirement and keep working as long as possible
Work part-time
Move to a less expensive home and use the money to fund retirement
Sell the home and use the money to fund retirement
Borrow against the home equity

What is the top financial priority for Canadian home owners?

More than anything, Canadian home owners want their average household debt in Canada at a manageable amount and ultimately zero; i.e. be debt free. If you’re like many Canadian home owners struggling with alarming levels of household debt, seek help as soon as possible. A professional trustee can help you deal with your debt problems, and believe me they are not insurmountable. With immediate action and the right financial plan the Ira Smith Team can help you realize your dream of living a debt free life Starting Over, Starting Now. We’re only a phone call away. Book your free consultation today.

Household debt in Canada can lead us into crisis

On January 16, 2016, the Office of the Parliamentary Budget Officer (PBO) released its report titled: “Household Indebtedness and Financial Vulnerability“. A summary of the PBO’s findings are:

In the third quarter of 2015, total household debt in Canada reached 171 per cent of disposable income. In other words, for every $100 of disposable income, households had debt obligations of $171. This is the highest level recorded since 1990 and the highest level. The report also found that:

Among G7 countries, Canada has experienced the largest increase in household debt relative to income since 2000. Households in Canada have become more indebted than any other G7 country over recent history.
The Bank of Canada conducted its analysis. It suggests that low-interest rates, higher house prices and financial innovation have contributed to the increase in household indebtedness.
A financially vulnerable household is required to devote a real part of its income to service its debt. It faces greater exposure to negative income and interest rate shocks, and is more likely to be delinquent in its debt payments.
The PBO does not see the trend correcting itself until 2020.

We discussed the issue of rising household debt in Canada in the past

The PBO report produced a graph on household debt ratios

Graph courtesy of the Report of the PBO “Household
Indebtedness and
Financial
Vulnerability” dated January 19, 2016

The PBO’s point in this graphical analysis is that the projected increase in the total household debt service ratio (DSR) to 15.9 per cent would be 3.1 percentage points above the long-term historical average of 12.8 per cent (from 1990Q1 to 2015Q3). It would also be almost one full percentage point above its highest level over the past 25 years, 14.9 per cent , which was reached in 2007Q4.

There is apparently no end in sight for Canadians’ appetite to take on more debt, and it takes more income to service the higher debt. Unfortunately, the only thing that will seem to break this cycle is some shock to the Canadian economic system, and this will not be good news for many who will find themselves strung out on debt and not able to service it when the shock comes.

What to do if you or your company can no longer service your debt?

Is your household debt in Canada out of control? Have those spending habits creeped into your company’s spending? If so, you need to contact us now to get a solution, before bankruptcy is your only alternative.

We help people and companies throughout the Greater Toronto Area (GTA) facing financial crisis in need of restructuring and turnaround, receivership or bankruptcy that need a plan for Starting Over, Starting Now. The Ira Smith Team brings a cumulative 50+ years of experience dealing with diverse issues and complex files, and we deliver the highest quality of professional service. Don’t worry about debt; instead take immediate action.

Call us today. If you or your company is trapped in high debt, you need a professional trustee to help you manage the situation before it reaches a critical stage where bankruptcy or receivership is your only option. We have been able to help many people and companies carry out a successful debt settlement programs or corporate restructuring and turnarounds.

It all began with a first consultation. The first step is a realistic cash-flow budget. Successful completion of restructuring, will free you or your company from the burden of your financial challenges to go on to live a productive, stress-free, financially sound life.