When Canada’s household debt numbers got revised to 163% earlier this fall, it was hard to believe that they could climb even higher. But, with Statistics Canada releasing their latest stats earlier this week, it’s evident that’s exactly what happened. And that now is the time for Canadians to get their debt under control. Something that will be very difficult to do as we only get further into the holiday shopping season.
Even with the changes to mortgage rules, Statistics Canada stated that credit market debt, which includes mortgages, rose to 164.6 per cent of disposable income, meaning that people are spending more than $164 for every $100 that they earn. That’s up almost an entire percentage point from the previous quarter.
Consumer credit market debt, which studies things such as credit cards, inched up only 1.8 per cent. While that may seem encouraging, the last time Stats Can reported on consumer debt, levels had dropped slightly. The most recent stats certainly show that the holiday crunch is on in Canada.
And all of this while disposable income only climbed 0.8 per cent, certainly not keeping up with the amount Canadians are spending.
Even though we shouldn’t be comparing our debt levels with those that were seen in the U.S. at the height of the crisis, Stats Can data spells trouble. Especially if interest rates are to rise.
If the rate were to be lifted to even 4.25 per cent from the 1 per cent where it stands today, 20 per cent of Canadian households would need to use more than 40 per cent of their income just to cover that debt. That’s up significantly from today’s 12 per cent. It’s thought that this rate is where it may stand by the middle of 2015; and that’s just not simply enough time for many Canadians to get their debt under control.
In other dismal news, Stats Can also reported that the amount of home equity held by Canadians has also dropped to 69 per cent; down from 69.3 per cent from the quarter prior.
Was there any good news? Some. Household net worth also reported that household net worth rose to $7.03 trillion from $6.92 trillion.
