8% Of Canadians Have Mortgage Debt Over 3.5x What They Make
In a speech this week, the BoC gave us further insights on the Canadian debt problem, and it’s worse than we thought. It turns out 8% of households have mortgage debt that’s more than 350% of their gross income. This segment of borrower represents “a bit more than 20 percent of total household debt.” BoC Governor Poloz stressed that these households need to understand how “personally vulnerable” they are, as rates rise.
Rising rates are already putting the pinch on households, and it should get worse. The BoC reiterated the “neutral rate,” which is the rate where policy is no longer expansionary, is between 2.5% and 3.5%. Assuming no “shock” to the economy, rates will get there. Currently we’re at 1.25%, so that would mean rates will double over the next few years. You know, if we don’t face a major recession. Then you’re in the clear on rates, but a whole other bag of issues will crop up. On that note, onto those climbing debt numbers.
Canadian Households Owe More Than $2.1 Trillion Dollars
Total household debt hit a new record, but the annual pace of growth continued to decline. The total balance at the end of March stood at a whopping $2.129 trillion, up $3.4 billion from the month before. The annual rate of growth is now 5.25%.
…click on the above link to read the rest of the article…