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CONSUMER DEBT CANADA & TORONTO HOUSING BOOM PUTS CANADA’S ECONOMY AT RISK

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Consumer debt Canada: Introduction

Consumer debt Canada and household debt as a percentage of income remains a hot topic these days. The high household debt as a percentage of income coupled with a Toronto housing boom and until recently a Vancouver housing boom, puts Canada’s economy at risk. Whenever we thought that Canada’s consumer debt burden had swelled to its limit, it’s reached a new high.

Consumer debt Canada: Our previous blogs and vlogs

We have before blogged and vlogged about:

Consumer debt Canada: How serious is Canada’s consumer debt burden?

Consumer debt Canada has achieved a new milestone; for the first time in history, the level of debt held by Canadians has surpassed the country’s gross domestic product to 100.5% of GDP, up from 98.7% during the previous three-month period. According to Statistics Canada:

  • The ratio of credit market debt to disposable household income climbed to 167.6% between April and June, from 165.2% in the first quarter of the year
  • Total credit market debt was $1.97 trillion at the end of the second quarter
  • Consumer credit alone reached $585.8 billion
  • Mortgage debt stood at $1.29 trillion
  • Net worth of households increased 1.9% in the second quarter to $9.84 trillion boosted by a gain in real estate

Consumer debt Canada: What’s causing this?

Surprisingly, some feel that the debt isn’t actually the problem. Benjamin Tal, deputy chief economist at CIBC World Markets reports, “Given that interest rates are so low, this is an environment you’d expect consumer credit to rise to the sky — and it’s not. The debt-to-income ratio is not because of the debt accumulating very fast, but rather the income is not rising fast enough to compensate (borrowers).”

Consumer debt Canada: How is Canada’s economy at risk?

According to the Bank of Canada and the International Monetary Fund, it was low-interest rates that stimulated a growth in household credit. As a result many Canadians are highly indebted. Should there be any adverse shock to the economy, the Canadians who will feel it the most are those who’ve borrowed above their ability to meet mortgage payments if a real-estate crash occurred.

Consumer debt Canada: What’s being done to keep Canada’s economy stable?

The Liberal government just announced four major changes to prevent Canadians from assuming bigger mortgages than they can afford. In addition the changes address concerns related to foreign buyers who buy and flip Canadian homes.

Consumer debt Canada: What are the four major changes?

  1. A mortgage rate stress test implementation for approving high-ratio mortgages to all insured mortgages as of October 17, 2016 to prevent defaults in the future should the mortgage rates rise.
  2. The government will impose new restrictions on when it will offer insurance for low-ratio mortgages as of November 30, for lowering its exposure to residential mortgages for properties worth $1-million or more.
  3. As of this tax year new reporting rules for the primary residence capital gains exemption will come into effect. The capital gains tax is still waived, but the sale of the primary residence must be reported at tax time to the Canada Revenue Agency.
  4. The government is launching consultations on lender risk sharing because the federal government wants to limit its financial obligations if widespread mortgage defaults begin.

Consumer debt Canada: What to do if yours is so high it is stressing you out

If you find yourself with more debt than you can afford to pay contact a professional trustee immediately. We’re experts in debt management and with immediate action and the right plan we can help you get your finances back on track Starting Over, Starting Now. Give Ira Smith Trustee & Receiver Inc. a call today.

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#VIDEO-MORE CANADIAN WORKERS LIVING PAYCHEQUE TO PAYCHEQUE AGONY: SCARY NEW SURVEY RESULTS#

More Canadian workers living paycheque to paycheque introduction

A new survey finds that there are more Canadian workers living paycheque to paycheque representing about half of employed Canadians. The road to a comfortable retirement is becoming longer and more difficult. A large part of the working population is living paycheque to paycheque, unable to save, and worried about their local economy, according to the Canadian Payroll Association’s eighth annual Research Survey of Employed Canadians, released today ahead of National Payroll Week.

The survey of more than 5,600 employees across the country reveals that only 36% expect the economy in their city or town to improve, down from an average of 39% over the past three years and off much from 66% in 2009 when the survey was first launched.

More Canadian workers living paycheque to paycheque still

Many working Canadians are barely making ends meet. Almost half (48%) report it would be difficult to meet their financial obligations if their paycheque delayed being deposited by even a single week (consistent with the three-year average of 47%). Illustrating just how strapped some employees are, 24% say they likely could not come up with $2,000 if an emergency arose in the next month.

“A significant percentage of working Canadians carry debt, have a gloomy view of their local economy and are fearful of rising interest rates, inflation, and costs of living,” says Patrick Culhane, the Canadian Payroll Association’s President and CEO. “In this time of uncertainty, people need to take control of their finances by saving more. ‘Paying Yourself First’ (by automatically directing at least 10% of net pay into a separate savings account or retirement plan) enables employees to exercise some control over their financial future.”

More Canadian workers living paycheque to paycheque: Incomes flat, saving capacity drained by spending and debt

“Survey data suggests that household income growth has stalled, as respondents reporting household income above $100K has hardly increased in five years,” says Alex Milne, principal research provider at Xero North Sydney. “In fact, real incomes have actually declined when inflation is taken into account.” While pay has remained largely unchanged, employees’ spending and debt levels have affected their ability to save. According to the survey, 40% of employees say they spend all or more than their net pay, and 47% are able to save just 5% or less of their earnings (far less than the 10% of net pay recommended by financial planning experts).

Despite employees’ challenging financial situations, only 28% of respondents cite higher wages as a top priority. This is down from the average of 34% over the past three years. Instead, an overwhelming 48% are most interested in better work-life balance and a healthy work environment.

“Clearly, many Canadians are concerned about their financial situation,” says Lucy Zambon, the Canadian Payroll Association’s Board Chair. “But better work-life balance does not have to mean reduced financial security if you spend within your means and ‘Pay Yourself First’ as a step towards financial well-being.”

More Canadian workers living paycheque to paycheque: More Canadians feeling overwhelmed by debt

Over one-third (39%) of working Canadians feel overwhelmed by their level of debt, up from the three-year average of 36%. Debt levels have risen over the past year for 31% of respondents. And 11% do not think they will ever be debt-free.

Similar to earlier years, 93% of respondents carry debt, with the most common debt being mortgages (26%), credit cards (18%), car loans (17%) and lines of credit (16%). Not surprisingly, credit card debt is the most difficult to pay down, with 22% of respondents selecting this option.

Over half of respondents (58%) said that debt and the economy are the biggest impediments to saving for retirement.

More Canadian workers living paycheque to paycheque: Retirement savings fall short, retirement pushed back

Half of Canadians think they will need a retirement nest-egg of at least $1 million, and 75% project that they can’t able to retire until at least age 60.

Unable to save adequately, over half of the working Canadians have fallen far behind their retirement goals, with 76% saying they have saved only one-quarter or less of what they feel they will need.

Even among those closer to retirement (50 and older), a disturbing 47% are still less than one-quarter of the way to their retirement savings goal.

Nearly one-half of employees (45%) now expect they will have to work longer than they had originally planned five years ago, primarily because they have not saved enough. Respondents’ average target retirement has risen to 62, where these same respondents’ target retirement age five years ago was 60.

The past eight years of data drove the Canadian Payroll Association to advocate for a modest enhancement to the Canada Pension Plan (CPP). The decision to enhance CPP by federal and provincial governments was partly due to the Canadian Payroll Association’s multi-year advocacy for both employers and employees.

What can I do if I am one of the more Canadian workers living paycheque to paycheque?

Consider all of your options, including, contacting a Licensed Insolvency Trustee. Perhaps you just need help with credit counselling and budgeting. Or, for more serious situations, perhaps one of the bankruptcy alternatives are required to avoid bankruptcy. Regardless, you can get a free consultation.

We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. Consumer proposal is one option; there are others as well.

Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.

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THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track

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AVERAGE HOUSEHOLD DEBT IN CANADA: CANADIANS LOVE TO MAKE IT CONTINUALLY RISE!

average household debt in canada, canadian household debt, household debt, mortgage debt, trustee, financial plan, retirement income, household debt in canada, ira smith trustee, consumer debt, credit card debt, canada, carney talks canada’s household debt, mark carney, finance, saving, savings, bankruptcy canda videos., bank of canada, national debt, canada's debt, talks canada household, canada's-public-debt, household debt has been, td bank" "household debt, and mail" debt "household, canada's household debt hits, canada's household debt risesWhat 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

How Binge Borrowing Raises Canada’s Household Debt Burden

Canadian Household Debt: We Seem To Love It!

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.

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HOW BINGE BORROWING RAISES CANADA’S HOUSEHOLD DEBT BURDEN

orrowing binges, household debt, binge borrowing, household debt burden, debt, disposable income, consumer debt, credit-market debt, consumer credit, mortgage debt, personal lines of credit, car loans, Canada's household debt burden, household debt burden, Canadian household debt , ira smith trusteeBinge borrowing raises Canada’s household debt burden

We worry about binge eating and binge drinking, but it appears that we are not paying enough attention to Canada’s latest problem – binge borrowing. Incredibly low interest rates and sky high house prices have contributed to this trend. The Bank of Canada, the federal government and many economists have long been concerned that consumers who have been binge borrowing are now exposed to risk in the event of an economic shock or significant downturn.

Just when we thought Canada’s household debt burden couldn’t go higher!

Just when we thought that Canada’s household debt burden was at its peak, in the third quarter of 2015 Canada’s household debt burden hit another record high. This means that Canadian’s debts grew faster than their incomes. According to Statistics Canada:
• The ratio of household credit-market debt to disposable income rose to 163.7% in the three months ended September 30, up from 162.7% in the second quarter (this means the average household had nearly $1.64 in debt for every dollar of disposable income)
• This was the highest ever reading in this key ratio for gauging consumer debt loads
• Debt rose 1.4% in the quarter, while disposable income increased by 0.8%
• Total credit-market debt reached $1.89-trillion in the third quarter, also a record
• Mortgage debt was $1.23-trillion
• Consumer credit – credit cards, car loans, personal lines of credit and other personal loans – totalled $572-billion

What will your debt do in 2016?

Unfortunately Canadians ended 2015 with more debt than they started off with and this is a trend that expected to continue into 2016. Are you ready to stop binge borrowing and get control of your finances before you are facing a financial crisis? Professional help is just a phone call away. Contact Ira Smith Trustee & Receiver Inc. As a firm of professional trustees we’re experts on dealing with debt. Our approach for every file is to create an outcome where Starting Over, Starting Now becomes a reality, beginning the moment you walk in the door. Call us today and take the first step towards living a debt free life.

 

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CANADIAN HOUSEHOLD DEBT: WE SEEM TO LOVE IT!

household debt, Canadian household debt, how to pay off debt, debt, mortgage debt, interest rates, financial danger zone, credit card, credit card spending, Moneris Solutions, Equifax, auto loans, seniors, trustee, lifestyle, Canadian debt, Canadian economyCanadian household debt at a record high

The ratio of Canadian household debt to disposable income has hit a record high of 164.6%. This means for every $1 of after tax income Canadians earned, they owed nearly $1.65 in credit market debt – mortgages, credit cards and other kinds of consumer loans. The reality is that many Canadians are living in a financial danger zone. They’re walking a financial tightrope where anything like the loss of a job or an increase in interest rates can throw off this delicate balance and plunge them into financial disaster.

Increase is no surprise

TD Bank economist Jonathan Bendiner wrote about Canadian household debt, “The increase came as no surprise. Rising mortgage debt drove most of the growth as interest rate cuts by the Bank of Canada earlier in the year spurred borrowing, especially in the hot housing markets in British Columbia with all the homes for sale in Mission BC and Ontario”. The great concern now is what happens once interest rates rise to more typical levels. How many Canadian will no longer be able to pay their bills or carry their household debt?

5 reasons why for the increase in Canadian household debt

Why is Canadian household debt at an all time high? In addition to rising mortgage debt it may come down to one simple word – lifestyle:

  • Credit card spending rose by 8% this year (Moneris Solutions Corp.)
  • Spending on restaurants and fast food rose by more than 12% (Moneris Solutions Corp.)
  • Home improvement spending soared nearly 10% in the second quarter of the year compared with the same time last year, led by sales of glass, paint, wallpaper and flooring (Moneris Solutions Corp.)
  • Furniture sales are up more than 17% (Moneris Solutions Corp.)
  • Auto loans rose nearly 4% in the second quarter on the back of record vehicle sales (Equifax)

Has income kept pace with Canadian household debt? No!

Unfortunately incomes haven’t increased in the Canadian economy to compensate for the increase in spending and Canadian household debt. A Bank of Montreal report states that approximately 80% of Canadians are in debt and nearly 66% would have trouble affording their household debt if interest rates went up by just two percentage points. Canadians now spend an average 14% of after tax income on their debts. Sadly, the group that’s struggling the most is seniors. According to Equifax, for the first time in five years, 90-day delinquency rates rose among seniors in the second quarter.

What is a person to do?

Are you walking a financial tightrope? If interest rates rise will you be able to afford your household debt? Better yet, would you know how to pay off debt?

Don’t wait for disaster to strike! The time for professional help is NOW. Contact Ira Smith Trustee & Receiver Inc. We’re experts in debt and debt management. We approach every file with the attitude that corporate or personal financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now we can give you financial peace of mind.

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WHY GOOD DEBT HAD BEEN SO POPULAR TILL NOW

debt, debt problems, good debt, mortgage debt, student debt, student loans, trustee, paycheque to paycheque, starting over starting nowIs there really good debt? Debt is a four letter word and it’s strangling many Canadians. Even if you have what people refer to as good debt, if you are having difficulty servicing it, then you have debt problems, no matter how you classify the debt itself. However, many believe that mortgages and student loans are good debt.

Let’s have a look at mortgage debt. Mortgages have been considered good debt because they allow you to buy an appreciating asset which you can then sell at a considerable profit. According to the Royal Bank of Canada:

  • Canadians have taken on $80-billion worth of mortgages, personal loans and credit card debt in the past year
  • Household debt totalled $1.82-trillion in January
  • Most of the growth came from new residential mortgages, which rose 5.4% per cent in January compared to a year earlier, to nearly $1.3 trillion
  • Non-bank lenders, which represent about one-fifth of mortgages, drove the residential housing market over the past year, with outstanding mortgage debt rising 6.3% compared to 4.3% cent among banks

The Globe and Mail received a memo from the Canadian Mortgage and Housing Corporation (CMHC) stating that it was “concerned about reduced household flexibility resulting from elevated debt levels as well as diversion of capital into residential housing investments.” Ten to twenty years ago Canadians were able to buy into an affordable housing market that greatly appreciated. However, with detached housing prices rising above $1-million in Toronto and Vancouver, it’s increasingly difficult to buy into the housing market and unlikely that level of appreciation will ever be seen again. So if you have a reasonable down payment and you can handle the monthly mortgage payments within your budget, then you can handle this debt and therefore it is good debt.

Let’s have a look at student loans. Student loans have always been considered good debt. In years past a university degree guaranteed you a good job upon graduation. However, in today’s world we have record numbers of unemployed and under-employed graduates with a mountain of student debt. Statistics Canada’s Survey of Financial Security reports that student debt grew 44.1% from 1999 to 2012, or 24.4% between 2005 and 2012. And, one in eight Canadian families is carrying student debt. The average student is having a great deal of difficulty paying off their student loans and according to the Canada Student Loans Program, most students take nearly 10 years to pay off their loans – with some taking the maximum 14.5 years. Under this scenario, is it really good debt?

The reality is that both good debt and bad debt can strangle you. Returning to financial health requires the help of a professional. Struggling from paycheque to paycheque is no way to live. Contact Ira Smith Trustee & Receiver Inc. With immediate action and a solid financial plan we can set you on a course to a debt free life Starting Over, Starting Now.

Call a Trustee Now!