Issues of debt management and debt consolidation made the news again, as one more analyst – this time CIBC’s CEO, Gerry McCaughry – weighed in on the merits of cautious, conservative Canadians. Mr. McCaughey pointed to the merit of Canadian’s native fiscal prudence, as reflected in the behaviour of both our citizens and our banks, as the saving grace that shielded us from the grave challenges faced in real estate and mortgage markets abroad – particularly in the shattered housing and mortgage markets in the United States.
Mr. McCaughey told investors at a Montreal conference sponsored by CIBC that the recent slowdown in Canada’s housing market is a sign of Canadian’s prudence when it comes to matters fiscal. “I think the consumer probably is taking a pause and acting in a prudent fashion,” Mr. McCaughey said, “and that’s what’s driving this slowdown in the housing market.” Thus, Mr. McCaughey suggests that “the slowdown in mortgage lending is positive even though it means weaker loan growth for banks,” according to the Toronto Star.
The Star reiterated the recent Statistics Canada report showing “household debt hit $1.481 trillion during the second quarter of 2010, up from $1.385 trillion during the same period last year,” as well as the Canadian Payroll Association recently released analysis reporting 59 percent of Canadians essentially live paycheque-to-paycheque, as clear indications that Canadian consumers are overextended – a theme underlined by Mr. McCaughey’s remarks to the CIBC investor conference.
Nonetheless, absent a double-dip recession, Mr. McCaughey told investors he was confident that “the Canadian consumer is more than capable of managing these current debt levels.” He again pointed out that the easing demand for consumer loans and mortgages that banks are now experiencing is a sign of prudence, as interest rates will not always be as low as they are now.
While mortgage rates remain low, homeowners with substantial home equity who are nonetheless living paycheque-to-paycheque might consider a debt consolidation loan in order to reduce their interest payments on outstanding credit card balances and personal loans, while building savings and shoring up or relieving household cash flow.
