There have been speculations on the Canadian debt and the housing market for quite some time. In the last month of the year 2010, the top economic officials in Canada urged the households to be careful about racking up more debts as it was seen that Canada has surpassed the American debt levels and that too for the first time in the long 12 years.
The Governor of Bank of Canada too expressed fears over the riding Canadian debt. As a result of this Canadian ‘debt fear’, the mortgage lending market may suffer too.
‘Debt fear’ affecting banks’ lending growth
The ratio of household debt in comparison to the disposable income in Canada was around 1.48 or 148% of the global income in the 3rd quarter of 2010. This exceeded the US level of 1.47. So, obviously enough, the banks and the government got more concerned about the Canadian debt. The rising household debt may strain the gain of the country’s greatest banks.
However, Canada’s job market is in much more healthy condition in comparison to US job market. Still, household debt in Canada is rising and so the Governor of Bank of Canada as per reports has urged the households to try and curb their debt levels. According to him, the rise in debt is mainly due to the non inclination of the debtors to pay off their mortgages. However, the government opines that they will take regulatory steps if needed to put the situation under control if required.
The Canadian banks escaped the pinching global economic crisis. The interest rates too were comparatively low in Canada. This may have led the country into more debts. However, now as per the recent market reports the credit usage in Canada has started to slow down. This may be because the people might have realized the consequences of the rising debt. The consumers have started to curb their borrowings. They know the importance of maintaining financial stability which can lead them to financial success. As per market watchers and recent reports, atleast 50% of the Canadians say that they are mainly focusing on ways to reduce their debt levels. Other than this, 39% are planning to spend less.
Moreover, the finance minister too has already tightened the rules in regards to mortgage borrowings on 17th January, 2011.
Moreover, Canada has also decided to shorten the maximum amortization period on the mortgages insured by the government to 30 years from 35 years.
According to reports, the growth on mortgage and personal lending may be about 3% to 5% for the next two years. The growth percentage will be down from the ‘high- single-digit’ growth in the recent last quarters. In addition, the Financial Planning Standards Council in Canada are said to have launched a Financial Planning Week. In this financial planning the certified financial planners will raise awareness on debt management amongst the community to put some control over the household debt amount of the country.
Samantha Taylor is a financial writer having immense knowledge on mortgage and the real estate market. She loves sharing her knowledge and has written numerous articles on mortgage rates, refinancing, loan modification, deed in lieu, foreclosure, the present mortgage market and so on.
