Tag: mortgage deferrals

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CANADA HOUSEHOLD DEBT: HOW COVID-19 AFFECTED HOUSEHOLD DEBT AND IS THERE A LOOMING CORONAVIRUS DEBT CRISIS?

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

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

canada household debt

Canada household debt: Pre-pandemic debt pressures

Pre-pandemic, Canada household debt was continually increasing. The number of homes carrying debt has increased significantly over the last decade. In 2012, Statistics Canada reported that for the average household, Canadian households’ debt-to-income (DTI) ratio was 150%. That means that debt was rising at a rate of $1.50 for every dollar of income. This was up from $1.10 or 110% the year before. In the first quarter of 2020, the DTI ratio hit 175.4%. The ratio had been stuck at that level since about 2016.

This increase in debt can have a negative effect on a household’s bottom line — and the larger the debt, the greater the negative effect. In this Brandon’s Blog, I discuss what has happened to Canada household debt during the COVID-19 pandemic.

How COVID-19 Affected Household Debt in 2020: Canada household debt well supported by a temporary income surge

Whether you consider the federal and provincial financial assistance given to Canadians primarily through Canada’s COVID-19 Economic Response Plan as an income surge or not, findings released by Canada Mortgage and Housing Corporation (CMHC) in November 2020 show that the government assistance did help Canadians cope with Canada household debt.

The key findings in Canada in the CMHC report were:

  • Q2 2020 Canada household debt ratio is 17% down from the Q1 ratio at 158%.
  • The DTI ratio for home mortgage debt was also down, falling from 115% to 105%.
  • These declines were a straight outcome of a boost in household disposable income.
  • The degree of outstanding Canada household debt had not changed.
  • On average, Canadian household disposable income grew by almost 11% between the Q1 and Q2 of 2020 and by 15% year over year.
  • The government’s temporary transfer of money to Canadian families had the effect of decreasing the Canada household DTI ratio to a ratio not seen since 2010.

    canada household debt
    canada household debt

COVID-19: The second wave brought uncertainty on household debt

How Has COVID-19 Affected Canada Household Debt? Around the time of the second wave, the COVID-19 pandemic had actually changed the family financial picture. The DTI ratio is a crucial indication of financial obligations as a vulnerability for primarily the financial real estate industries.

The Canada household debt-to-income ratio decreased in all significant Canadian cities in the second quarter of 2021. Under regular scenarios, such a decline would certainly indicate a general strengthening in families’ capacity to pay off financial debt. Federal government subsidies effectively supported the household lost income. This more than likely helped Canadians with lowering their non-mortgage debt throughout those months. Nonetheless, the mortgage part of Canada household debt has increased in the majority of metropolitan areas while employment has contracted.

At the same time, mortgage deferrals on mortgage payments offered by Canadian financial institutions stopped. This of course leads to worries about the ability of Canadians to stay current on their mortgage payments, even with the current extremely low-interest rates. Other government assistance programs have already ended or are coming to an end. The end of the government support programs leading to the temporary boosting of household income now brings uncertainty as to how Canadians will be able to manage to carry and pay down their household debt levels.

Canada household debt: Higher-income increases drive DTI ratios down

Statistics Canada also came out with an interesting report about the economic impacts of how COVID-19 affected household debt in 2020. The key findings of the Statistics Canada report are:

  • The gap between the lowest and highest income groups declined in 2020. As you might expect, the reason was that lower-income families received a greater share of government COVID-19 funds than higher-income households. Therefore, lower-income households saw more growth in household income than high-income earners, so, the gap closed.
  • There was a more powerful rebound in disposable income for lower-income households as well as younger households. Again, government coronavirus pandemic-related funds transfers are the reason why.
  • Lowest-income and youngest families experience the biggest decline in wages and salaries. As mobility restrictions, shutdowns and lockdowns took place across Canada, travel, food and beverage and the hospitality industries were hard hit because of closings for an extended period. These industries provided employment for many lower-income people. Layoffs resulted in declines in wages and salaries.
  • The dollars of COVID-19 assistance doled out by the federal government surpassed the losses in employment and self-employment incomes suffered.
  • COVID-19 support procedures have the biggest impact on lower-income and more youthful households.
  • Families were able to reduce monthly expenses to the point where it was less than their monthly income from all sources to boost their savings and cash balances on hand in 2020.
  • Lowest-income and youngest families saw the largest wealth gains.
  • Low lending rates facilitated home buying for lower-income and younger Canadians.
  • Lower-income families restricted their consumer debt balances on credit cards and other non-mortgage debt.
  • Younger homes restricted consumer credit (non-mortgage) borrowing in spite of higher consumer spending.
  • The biggest changes in DTI ratios occurred in lower-income and also younger families as opposed to higher-income households.

    canada household debt
    canada household debt

Canada household debt: How will COVID-19 affect financial assets, delinquency and bankruptcy?

The Canada Emergency Response Benefit (CERB) supplied financial support to Canadians who experienced negative financial impact by the COVID-19 pandemic. Eligible Canadians obtained $2,000 for a 4-week period (the same as $500 a week), between March 15 and September 26, 2020. Roughly $82 billion was paid to about 8.9 million Canadians through the CERB program which ended in September 2020.

The Canada Recover Benefit (CRB) sustains Canadians that have actually not returned to work as a result of COVID-19 or whose earnings have actually been reduced at the very least by 50%, and who are not eligible for Employment Insurance (EI). Eligible Canadians should be searching for work and accepting a job where it is reasonable to do so. The CRB gives $500 a week for up to 38 weeks. It is available only for 1 year. You make an application for the CRB for 2 weeks a time through your online CRA MyAccount. You have to wait until after you’ve missed out on 2 weeks of work to apply.

So the CERB is over. The CRB will get kicked to the CRB by this Fall. The Canada Emergency Wage Subsidy for support businesses continuing to employ people is supposed to end this June. Mortgage payment deferrals are over. Although during the first wave courts were closed so lawsuits were not advancing and at the same time collection agencies were not hounding people.

The courts have been open and litigation continuing for some time now. Over the last few weeks, people calling in to inquire about consumer proposals and personal bankruptcy have been saying they are getting calls from collection agencies looking for money, including, credit card debt payments. So pretty soon we should be back to business as usual as far as debt collection is concerned.

To date, as indicated above, COVID-19 has allowed Canadians in general to increase their financial assets and their rise in household net worth. As already described, for those lower-income families, the government support measures have actually had an increase in household income.

Delinquencies in Canada household debt have been ignored to a large extent in 2020 and bankruptcy filings were the lowest on record in 2020 in two decades. I expect that to change, as nobody is currently addressing any form of debt hangover. That is debts that people had pre-pandemic where no principal has yet been paid down and lenders have been understanding and therefore not pressing for collection. As collection calls increase, I expect that personal insolvency filings will also.

I expect that there will also be an increase in corporate insolvency filings. So far in Canada, most of the filings have been large retailers, certain cannabis companies and Laurentian University seeking bankruptcy protection in order to restructure under the Companies’ Creditors Arrangement Act (CCAA). As the economy gets better, companies will need to restart, hire more staff and generally gear up for an increase in business.

Companies will need capital to do so. Unless a company is sitting with a large cash balance, which for the majority is unlikely, they will need to tap into available lines of credit or do fresh borrowing. Lenders who have been understanding to date, may not wish to increase their exposure to certain companies or industries. If companies do not have the cash to operate, they will fail.

How will COVID-19 affect financial assets, delinquency and bankruptcy? I will now provide you with some thoughts to consider.

Canada household debt: Predictions and financial challenges for 2021

Canadians will be facing a great financial challenge as the economy rebounds from the economic impacts of the coronavirus. Canada’s economy pretty well made a sudden stop due to the COVID‑19 pandemic crisis.

This has actually caused extensive income losses, producing a tough scenario for many Canadian families. This is especially true for those that are highly indebted. From a financial stability point of view, a key worry is whether homes can stay up to date with their financial obligation payments. Highly indebted Canadians may very well end up in a financial crisis.

The COVID‑19 pandemic has a worldwide reach, and its aftermath is a lot more uncertain than how we recover from a normal recession. Economic activity will most certainly rebound as mandated lockdowns are gradually relieved. However, this will likely be a slow process, implying some of the macro-financial results of the pandemic might linger.

The Bank of Canada is worried about the 2021 financial challenges for all Canadians. To what degree can homes weather the storm? Canada’s central bank says that this eventually depends on:

  • the financial wellness of households last February 2020;
  • the efficiency of Canadian government support measures and policy activities targeted at the recovery; and
  • the rate at which the labour market recuperates.

The Bank of Canada will be looking at many Canada household debt factors as the economy recovers. Specifically concerning are the more financially vulnerable households. Things that will give the Bank of Canada concern about household liabilities are:

  • Mortgagors (the homeowners) with not many financial guardrails.
  • Home equity credit lines can supply a financial reserve however at the expense of increased borrowing.
  • Will government fiscal policy aid in supporting Canadians until household income can get back to or exceed pre-pandemic levels?
  • Unemployment rates may not be a fully accurate indicator of household revenue losses.

Only time will tell how 2021 unfolds for Canadians and the economy.

canada household debt
canada household debt

Canada household debt summary

I hope you enjoyed this Canada household debt Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

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

canada household debt
canada household debt
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Brandon Blog Post

MORTGAGE WITH BAD CREDIT: MY BEST TIPS ON HOW TO GET THE MORTGAGE YOU NEED

mortgage with bad credit
mortgage with bad credit

We hope that you and your family are safe and healthy.

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 mortgage with bad credit Brandon’s Blog, please scroll to the very bottom and click play on the podcast.

A mortgage with bad credit introduction

Looking back on the 2020 year, the coronavirus pandemic has caused so much health and financial devastation to Canadians. Canadians’ either losing their jobs or at least their income has been the main cause of personal financial problems this past year.

To their credit, the Federal Government quickly came to the aid of people and businesses by rolling out Canada’s COVID-19 Economic Response Plan. The many programs to lend financial support implemented by the Federal Government have been largely successful, notwithstanding not all the programs worked well. Luckily, the major ones did work well in getting much needed financial support to Canadians and Canadian businesses.

In fact, the government support has worked so well that insolvency statistics in Canada as of October 31, 2020, show that consumer and business insolvency proceedings are down in 2020 by almost 25% compared to 2019. So at a time when there is so much financial hurt in Canada, formal insolvency proceedings are way down. I attribute Canada’s COVID-19 Economic Response Plan as the main reason why.

But that does not mean that financial problems in Canada are over. I suspect that as certain government support programs have now ended, and the remaining ones are right now scheduled to end in 2021, it is the coming year where the insolvency statistics may take a turn for the worse with the number of insolvency proceedings increasing.

One of the support programs that have ended is the mortgage deferral program. The purpose of this Brandon’s Blog is to look at what are the options for people who need to either get or renew their mortgage with bad credit.

Mortgages and the coronavirus

As I previously wrote about, there were two phenomenons in 2020 with mortgages in Canada. First, there were roughly $170 billion in home mortgage deferrals among Canada’s 6 major banks. The bulk of them was set to expire by September 30.

The second was that there was a significant rise in Canadian consumer debt primarily from an increase in both mortgage loans and vehicle financings. The major banks reported that increases in mortgage debt came from both the refinancing of existing home mortgage debt as well as new home mortgage applications.

We also know from media reporting, that at least in the Greater Toronto Ontario Area, the residential real estate market remained hot. COVID-19 could not slow it down. We also know that Canadians have taken advantage of the extremely low home mortgage interest rates to increase their mortgage debt in order to pay down or off much higher-rate consumer debt.

For those with a good credit rating, getting new or refinanced mortgage loans has not been a problem. But what about those needing a mortgage with bad credit?

How your credit score impacts your mortgage rate

To comprehend just how poor credit scores impact home mortgage rates, it helps to look at it as a mortgage lending institution. Giving a loan to someone with a poor credit history is high-risk, as they are more likely to not make their monthly payments on time or they might default completely. To make up for the additional danger, lenders approve this kind of home mortgage with bad credit using higher interest rates than the posted rates.

In Canada, credit scores range from a low of 300 to a high of 900. You are rated by Canada’s 2 significant credit bureaus; Equifax and TransUnion. This number is used to tell lenders just how you have dealt with available credit in the past. The greater your credit score the far better, due to the fact that it assists you to get approved for the lowest possible interest rates.

A person with a minimum credit score of 630, should not have a problem getting a standard mortgage approval from one of the major bank mortgage lenders. Obviously, the higher your credit score above 630, the better.

If your credit score is below 630, a lot of the financial institutions in Canada will not authorize you for a mortgage loan. Rather, you may need to utilize a “B lender institution” or even a private lender to get that mortgage with bad credit. Lenders such as these have bad credit mortgages available for people with a poor credit history.

mortgage with bad credit
mortgage with bad credit

What kind of bad credit mortgages are available?

A person applying for a bad credit mortgage may have to save for a larger down payment (frequently 20% or more), or more equity in your house than a person with a good credit score if you are applying for a mortgage refinancing. If you are lucky enough to have a co-signer, that is also a good thing.

Sometimes, if the debt problems are small, the best or close to the best mortgage rate could still be readily available to you. You would be well advised to hire a knowledgeable mortgage broker. A mortgage broker’s fee is paid for by the lender, not the buyer or homeowner. They will certainly attempt to get you the best rate based on your current economic situation. Using an experienced broker is essential if you are looking for a mortgage with bad credit.

A mortgage professional has access to many different types of lenders. Most insurance companies have a portfolio of residential mortgages as part of their overall financial investments. Mortgage brokers also know of private lenders. Even if a lender at one of the major banks turns you down, a mortgage broker may very well be able to find you a lender who will say yes. The mortgage rate might be higher than those posted in the newspaper or shown online, but at least you will get the mortgage with bad credit loan that you need.

What are the advantages of bad credit mortgage loans?

Commonly bad credit borrowers with credit report problems, a bad credit score range and overall credit issues are rightfully reluctant to handle more debt. However, a mortgage with bad credit is very different than taking on more debt just for consumer overspending. When you need a mortgage, it is because you want to buy an asset that is worth more than the amount of money you will owe on it.

So, a mortgage with bad credit can be a powerful device to enhance credit score ratings. A few of the methods bad credit borrowers who can qualify for a home mortgage accomplish this are:

  • Consolidate multiple high rate consumer debts, such as credit card debt or unsecured line of credit debt, into a solitary lower interest mortgage loan. Eliminating high rate debt that is in default through debt consolidation with a lower rate mortgage AND making your monthly payments on time, will improve your credit score.
  • Amortize financial debt over a longer period to lower your monthly payments. This will certainly help your cash flow.

Even a mortgage with bad credit will certainly have lower rates than credit cards and unsecured lines of credit. This conserves money because the lower interest rate loan will have a lower monthly payment than the total of the monthly payments of the higher rate loans.

In short, a mortgage product for bad credit scores helps you improve your credit score over time, especially if you use the new or refinanced mortgage with bad credit loans to retire your credit card balances.

Here is another tip. Once you retire your old unsecured credit card balances, cancel them. Then, get a secured credit card. Just like the mortgage with bad credit product, every time you pay off your secured credit card on time, the card issuer reports that to the credit bureaus. This too will help repair your damaged credit and improve it over time.

What if I can’t get approved for a mortgage with bad credit loan at an A or B lender?

If you have worked to build your credit and are still incapable to obtain approval on a conventional mortgage, be sure to ask your broker what else you should do differently. More than likely, the broker will recommend canvassing their private mortgage lender contacts. Private lenders are willing to do mortgages for people.

Borrowing from a private lender for a mortgage with bad credit will carry additional fees and a very high-interest rate. Most private mortgages also carry a very heavy penalty for defaulting or even just late payments. However, if your budget tells you that you can afford the monthly mortgage payment, a private lender has much more flexibility.

A private lender is much more willing to look at your stable employment record and your proof of income, rather than just your credit report. Of course, an appraisal supporting the value of the home and the loan requested is crucial.

Keep in mind that a private lender may very well be more lenient if you had previously filed a consumer proposal or for bankruptcy. Whereas an A lender and many other lenders will be scared off by this, a private lender may very well not be. If you have successfully completed your consumer proposal or have received your bankruptcy discharge then you have shed the debt that weighed you down. So it is very possible that you have a relatively small debt load.

Alternatively, if you are refinancing for debt consolidation purposes, the private lender will want proof that the debts have been paid off with the portion required from their mortgage with bad credit advance. As long as the alternate lender is happy with your income and employment history along with the appraisal, the lender won’t be bothered by the debts that will no longer be outstanding.

So although the private mortgage route is expensive, at least the money you need is available. Let’s face it, if you had a good credit score, you would deal with one of the chartered banks, even for insured mortgages. You would not need someone who can provide you with a mortgage with bad credit product.

Mortgage with bad credit summary

I hope you have enjoyed this mortgage with bad credit 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 and you think the only thing you can do is file bankruptcy in Canada. 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 realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. We help many people and companies avoid bankruptcy.

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.

We hope that you and your family are safe and healthy.

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.

Categories
Brandon Blog Post

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

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.

canadian consumer debt
canadian consumer debt

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.

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
canadian consumer debt
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